The over 40% drop in oil prices since 2015 is indeed affecting oil multinationals across the world, including Royal Dutch Shell. Shell’s earnings on a Current Cost of Supplies (CCS) in the first quarter of 2016 dropped by $4 billion to $800 million down from $4.8 billion in the first quarter of 2015, barely three months after its acquisition of BG Group in February this year.
The company announced on Wednesday May 11, 2016, that the development has forced it to drastically reduce its capital spending for 2016 to $30 billion. “We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment,” the company’s Chief Executive Officer, Ben van Beurden stated.In the statement from the oil firmvan Beurden attributed the drop in earnings for the period to its shareholders to this, excluding identified items, which were $1.6 billion compared with $3.7 billion for the first quarter of 2015, representing a 58% decrease.
Putting all of this together, Beurden said “capital investment in 2016 is clearly trending toward $30 billion”, compared to previous guidance of $33 billion, and some 36% lower than the combined Shell and BG investment in 2014.Shell however, disclosed a profit earning of $4billion within the same period, a possibility van Beurden ascribed to the company’s downstream and integrated gas businesses, which he said remains  its current  areas  of strength.”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 “We will continue to manage spending, through dynamic decision-making across the organization, taking advantage of opportunities from both the deflating market and the two companies coming together.”
Van Beurdenalso said the union 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 Shell originally set out.”The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry. For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company”, he said in the statement.


Maureen Nzeogu
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