Shell Profit Hit Hard by Low Oil Prices -- 2nd Update
July 28 2016 - 04:10AM
Dow Jones News
By Selina Williams
LONDON-- Royal Dutch Shell PLC on Thursday reported a sharp drop
in profit as lower oil and gas prices took a further toll in what
is turning out to be another dismal quarter for the sector.
While Shell's oil and natural gas production rose by nearly a
third year-on-year in the second quarter to 3.51 million barrels of
oil equivalent a day, due largely to additional volumes from newly
acquired BG Group, the prices it received were around a third
lower. The quarter was the first full one that included BG, which
Shell bought in a roughly $50 billion acquisition that was
completed in February.
"Downstream and integrated gas businesses contributed strongly
to the results, alongside Shell's self-help program. However, lower
oil prices continue to be a significant challenge across the
business, particularly in the upstream," said Shell Chief Executive
Ben van Beurden.
Shares in the company fell more than 3% Thursday morning.
Shell's results highlight what is turning out to be another grim
quarter for oil company earnings, as the sector continues to
grapple with the collapse in crude prices to below $45 a barrel
from over $100 a barrel in mid-2014. Companies have slashed
billions of dollars from costs and shed thousands of jobs, but
earnings are still in the doldrums.
Shell rival BP PLC reported a second-quarter loss on Tuesday,
underperforming analysts' expectations.
Shell said its quarterly profit on a current cost-of-supplies
basis--a measure similar to the net income that U.S. oil companies
report--was $239 million, down 93% from $3.36 billion a year
earlier. Its adjusted earnings, stripping out one-off items such as
proceeds from divestments, fell to $1.05 billion from $3.76 billion
a year earlier.
A Wall Street Journal poll of seven analysts forecast adjusted
earnings of $2.27 billion for the quarter.
Revenue in the second quarter fell 19% to $58.42 billion. Cash
flow from operating activities fell 62% to $2.29 billion.
Shell's division that explores, develops and produces oil--known
as upstream--was the worst-performing unit of the company. Losses
in the unit, excluding one-off items, widened to $1.33 billion from
$469 million a year earlier, due to lower oil and gas prices.
Refining profits fell due to weaker margins. Integrated gas,
which includes big liquefied natural gas developments, was also
down due to lower LNG prices, which are linked to oil.
Gearing--a measure of the extent to which a company's operations
are funded by debt--rose sharply to 28.1% at the end of the second
quarter, compared with 12.7% in the second quarter of 2015,
reflecting the impact of the BG acquisition, Shell said.
(END) Dow Jones Newswires
July 28, 2016 03:55 ET (07:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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