The Courier & Advertiser (Fife Edition)
Shell profit frustrated by oil and gas price decline
Energy profits: upstream earnings fall but downstream earnings rise
Royal Dutch Shell suffered a 57% slump in first-quarter profits because of the fall in oil and gas prices.
Earnings excluding one-off items more than halved to $3.25 billion (£2.1bn) though the figure was better than City forecasts.
It came after the Anglo-Dutch oil giant said it was pulling nearly £10bn out of planned investment.
The group revealed last 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.
“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 nonstrategic assets. In parallel we continue to reduce our operating costs and capital spending.”
Shell’s underlying profits from upstream exploration and production arm fell 88% to $675 million (£437m) “impacted by the significant decline in oil and gas prices”.
The price of a barrel of Brent crude has fallen by half since last year.
The upstream earnings fall was partly cushioned by one-off items including a $600m (£389m) credit after UK tax breaks for the North Sea oil industry.
There was also a $1.42bn (£920m) gain from disposals of Shell unwanted operations.
A sharp improvement in the group’s downstream arm which includes refining and marketing activities as well as oil trading, was reported.
Underlying earnings in downstream were up 68% to $2.65bn (£1.7bn) in a better quarter for refining.
Shell’s results come two days after rival BP’s profits slumped due to lower oil and gas prices, an outcome lessened by a better downstream performance. Shares rose 1%. Keith Bowman of Hargreaves Lansdown stockbrokers, said the Shell results were ahead of expectations.
The group’s integrated business model was aiding performance, he believed, with management acting to boost prospects like bidding for the BG Group.