Shell Profits Fall 56% On Oil Price Woes

Shell (LSE: RDSB.L - news) has reported a fall of nearly 60% in quarterly profits following the slide in world oil prices.

Shell, which earlier this month announced a £47bn takeover of fellow FTSE 100 firm BG , reported earnings, excluding exceptional items, of $3.2bn (£2.1bn) in its first quarter.

Shell said profits from refining and trading increased by just over $1bn (£648m) on the same period last year, helping offset a fall in earnings from oil and gas production, which tumbled to $675m (£437m) from $5.7bn (£3.7bn).

On a current cost of supplies basis, which includes asset sale proceeds, profits rose 7%.

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 sharper focus is the sale of non-strategic assets. Asset sales total over $2bn (£1.3bn) so far this year, as we successfully reduced our onshore footprint in Nigeria.

"In parallel we continue to reduce our operating costs and capital spending; and by deferring and reshaping new projects, we can achieve further efficiencies and savings in the global supply chain."

Mr Van Beurden added that the proposed combination with BG would "create a stronger company for both sets of shareholders".

It "would accelerate Shell's growth strategy in deep water and LNG (liquefied natural gas) and create a springboard for further optimisation of our asset base, particularly when evaluating the longer-term portfolio," he said.

Shell's share price rose on the results announcement as the performance was better than analysts had expected.

Shell's stock, one of the most widely held by UK pension funds, had lost 12.2% of its value over the past 12 months ahead of the trading update.

Brent crude costs are currently 40% down on a year-on-year basis - recovering some of the ground it lost over six months when the markets reacted to a huge glut in supplies and concerns about world economic growth.

BP confirmed earlier this week the impact from the price collapse on its business.