Anglo/Dutch oil giant Royal Dutch Shell on Thursday posted a sharp drop in second quarter 2016 profit compared to a year earlier quarter as lower oil and gas prices weighed on the company’s earnings.
On a current cost of supplies (CCS) basis, Shell’s 2Q 2016 earnings were $239 million, a drop of 93% from $3.361 billion in the first quarter of 2015.
On a CCS basis, Shell’s 2Q 2016 earnings, excluding identified items, were $1.045bn, a fall of 72% from $3.76bn in the second quarter of 2015.
Shell explained that, compared with the second quarter 2015, CCS earnings attributable to shareholders excluding identified items were impacted by the decline in oil, gas and LNG prices, the depreciation step-up resulting from the BG acquisition, weaker refining industry conditions, and increased taxation. Earnings benefited from increased production volumes from BG assets.
During the quarter, Shell’s capital investment was $6.3bn.
Oil and gas production in 2Q 2016 was 3.508 million barrels of oil equivalent per day, an increase of 28% compared with the second quarter 2015. The impact of BG on the second quarter 2016 production was an increase of 768 thousand boe/d.
Shell’s CEO Ben van Beurden said: “Downstream and Integrated Gas businesses contributed strongly to the results, alongside Shell’s self-help programme. However, lower oil prices continue to be a significant challenge across the business, particularly in the Upstream.
“We are managing the company through the down-cycle by reducing costs, by delivering on lower and more predictable investment levels, executing our asset sales plans and starting up profitable new projects.”
Offshore Energy Today Staff