AMSTERDAM: Royal Dutch Shell PLC yesterday announced an 89 percent drop in net profit for the first quarter, blamed on slumping oil prices, adding that investment would be lower than expected.
Profit after tax stood at US$484 million in the January-March period, down from US$4.43 billion in the first quarter of last year, the Anglo-Dutch energy group said in an earnings statement.
Stripping out exceptional costs and changes to the value of Shell’s oil stockpiles, profit retreated 58 percent to US$1.55 billion.
Shell, which recently completed a mega takeover of smaller British rival BG Group, added that it planned this year to invest less than had been forecast.
“We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment,” Royal Dutch Shell chief executive officer Ben van Beurden said in the statement.
“The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out,” he said.
However, van Beurden said that capital investment would be about US$30 billion this year, down from an estimate of US$33 billion. The revised spending level would meanwhile be about 36 percent lower compared with the combined investment of Shell and BG during 2014.
“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,” said Laith Khalaf, a senior analyst at stockbroker Hargreaves Lansdown.
The faster-than-expected drop in capital expenditure “shows that the company is making operational progress in adapting to lower prices,” he said.
The global oil market had nosedived from more than US$100 in mid-2014 to 13-year lows of about US$27 in February, plagued by the stubborn supply glut, but prices have since rebounded to trade about US$45 a barrel. The slump in prices has caused energy groups worldwide to cut spending, slash jobs and sell assets.
Shell pressed ahead with its US$68 billion takeover of BG Group to help strengthening its position in the liquefied natural gas market.
