Shell profits slump after oil slide

Shell has been hit by the fall in oil prices.

Shell has been hit by the fall in oil prices.

Royal Dutch Shell has reported a 57% slump in first quarter profits after it was hit by the fall in oil and gas prices.

Earnings excluding one-off items dropped from 7.33 billion US dollars (£4.7 billion) in the same period last year to 3.25 billion US dollars (£2.1billion) though the figure was better than City forecasts.

It comes after the Anglo-Dutch oil giant earlier this year said it was pulling nearly £10bn out of planned investment. The group revealed this month that it was buying oil and exploration group BG for £47bn.

Chief executive Ben van Beurden said: “Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices.

“Meanwhile, in what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell.

“Part of this focus is the sale of non-strategic assets. In parallel we continue to reduce our operating costs and capital spending.”

Shell saw underlying profits from its upstream exploration and production arm fall 88% to 675 million US dollars (£437m) “impacted by the significant decline in oil and gas prices”.

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The price of a barrel of Brent crude has fallen by half since last year.

Shell’s fall in upstream earnings was partly cushioned by one-off items including a 600 million US dollar (£389m) credit after UK tax breaks for the North Sea oil industry.

There was also a 1.42 billion US dollar (£920million) gain from disposals as Shell sells off unwanted operations.

Meanwhile there was a sharp improvement in the group’s downstream arm which includes refining and marketing activities as well as oil trading.

Underlying earnings in downstream were up 68% to 2.65 billion US dollars (£1.7bn) in a better quarter for refining.

Shell’s results come two days after rival BP reported a slump in profits due to lower oil and gas prices, but which was also not as bad as expected partly thanks to a better downstream performance.

Shares rose 1%. Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: “The results are ahead of expectations.

“Like rivals including BP, the fall in the oil price has proved to be something of a double edged sword, with the earnings impacted upstream operations being partly compensated for by the tailwind given to its downstream refining business.”