SHELL’S FIRST QUARTER EARNINGS DROP BY $4BN

According to the result released by Shell, earnings have dropped by $4 billion compared with figures earned last year. Shell earned a dismal $0.8bilion in the first quarter of 2016 whereas in 2015, the oil major earned $4.8 billion in the same quarter.

“Royal Dutch Shell’s first quarter 2016 CCS earnings attributable to shareholders were $0.8 billion compared with $4.8 billion for the same quarter a year ago.

“First quarter 2016 CCS earnings attributable to shareholders excluding identified items were $1.6 billion compared with $3.7 billion for the first quarter 2015, a decrease of 58%’’, Shell said.
It explained that the negative earnings were impacted by the decline in oil, gas and LNG prices and weaker refining industry conditions.

“ Earnings benefited from lower operating expenses, as steps taken by Shell to reduce costs more than offset the increase in operating expenses associated with BG’’, it said.
First quarter 2016 basic CCS earnings per share excluding identified items also decreased by 63% compared with the first quarter 2015.

“Cash flow from operating activities for the first quarter 2016 was $0.7 billion, which included negative working capital movements of $3.9 billion. Total dividends distributed to shareholders in the quarter were $3.7 billion, of which $1.5 billion were settled by issuing 65.7 million A shares under the Scrip Dividend Programme’’, it said.

Shell explained that gearing at the end of the first quarter 2016 was 26.1% versus 12.4% at the end of the first quarter 2015, adding that the increase mainly reflects the impact of the acquisition of BG.
The company also announced first quarter 2016 dividend of $0.47 per ordinary share and $0.94 per American Depositary Share (“ADS”). Shareholders can also convert their earning to shares.

Speaking on the development, Shell’s Chief Executive Officer, Ben van Burden explained that ‘’Shell’s integrated activities differentiate us, with our Downstream and Integrated Gas businesses delivering strong results and underpinning our financial performance despite continued low oil and gas prices’’, he said, adding that Shell will continue to reduce spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment.

“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.

“Putting all of this together, capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36% lower than combined Shell and BG investment in 2014.

“Annual operating expenses excluding identified items are trending towards a run rate of $40 billion compared with 2014 combined spend of around $53 billion. In practice, we expect to absorb BG’s capital investment and operating expenses during 2016, with no net increase overall, compared with Shell stand alone in 2015.

“We will continue to manage spend, through dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together’’, he said and that the completion of the BG deal has reinforced Shell’s strategy and strength against the backdrop of hugely challenging times for oil companies.

“For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company.”