The Anglo-Dutch energy giant saw its after-tax profit reduced to a trickle in the first quarter, suffering from falling oil prices and hit by huge costs arising from its takeover of British rival BG.
In the January through March period, profit after tax reached $484 million (421 million euros), Royal Dutch Shell reported Wednesday – a massive drop of 89 percent compared with net profit of $4.43 billion earned in the same quarter a year ago.
Excluding exceptional costs and changes to the value of Shell’s oil stockpiles, group earnings looked only marginally better at $1.55 billion – down 58 percent.
Shell primarily blamed the slump in global oil prices for squeezing its profit, after they had nosedived from above $100 per barrel in mid-2014 to a 13-year low of around $27 in February, plagued by a global supply glut. But prices have since rebounded to trade around $45 a barrel.
Moreover, the Anglo-Dutch group is still digesting its $68-billion merger with British BG group which has boosted Shell’s proven reserves of oil and natural gas by 25 percent.
In a statement, Shell chief executive (CEO) Ben van Beurden defended the takeover whose benefits at a time of low prices were controversially discussed among industry analysts. He said the merger was “off to a strong start.”
“This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out,” Beurden added.
The slump in prices has caused energy groups worldwide to cut spending, slash jobs and sell assets. Shell sold assets worth $5.5 billion in the course of last year and slashed about 10,000 jobs.
For 2016, CEO Beurden announced the company would cut investment to $30 billion – down from $33 billion planned before, and about 36 percent less than Shell invested in 2014.
“We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment,” the CEO said.
Laith Khalaf, senior analyst at stockbroker Hargreaves Lansdown, said Shell’s faster-than-expected drop in capital expenditure showed that the company was “making operational progress in adapting to lower prices.”
“Royal Dutch Shell has taken a dramatic hit to revenues, but continues to maintain its dividend despite the storm that has hit global commodity prices,” he told the news agency AFP.
uhe/jd (AFP, Reuters, AP)