Shell reported a 93pc fall in its second-quarter profit compared with a year earlier
OREANDA-NEWS. Shell reported a 93pc fall in its second-quarter profit compared with a year earlier because of lower oil and gas prices and one-off charges resulting from the acquisition of UK firm BG.
Its profit, which excludes inventory effects, dropped to $239mn from $3.36bn a year earlier. One-off items amounted to $806mn in April-June, compared with $399mn in the same period of 2015.
"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," said chief executive Ben van Beurden.
Shell's production averaged 3.508mn b/d of oil equivalent (boe/d) in the quarter, up by 28pc from a year earlier thanks to a 768,000 boe/d contribution from assets added through its $54bn takeover of BG in mid-February. This was the first quarter in which Shell included a full three months of production from the assets.
"New field start-ups and the continuing ramp-up of existing fields, in particular the Corrib gas field in Ireland, and Erha North ph2 in Nigeria, contributed some 53,000 boe/d to production compared with the second quarter 2015," Shell said.
Higher output than a year earlier provided some support to the company's results, but failed to offset negative impacts of other factors. Shell's upstream division, which does not include its integrated gas business, reported a loss of $1.97bn compared with a $561mn loss a year earlier. The second quarter result included a one-off charge of $649mn, "primarily reflecting redundancy and restructuring charges of some $570mn". The integrated gas business delivered a profit of $982mn, compared with $1.34bn a year earlier.
Shell expects third-quarter profits of the integrated gas division to be hit by a reduction of about 15,000 boe/d of output because of maintenance compared with the same period of 2015.
"Upstream earnings are expected to be negatively impacted by a reduction of some 35,000 boe/d associated with sabotage incidents and repairs in Nigeria. Earnings could be further impacted if the security conditions continue to deteriorate," the company said.
Shell's downstream division made a profit of $1.72bn in the quarter, down by 37pc from a year earlier, largely because of weaker refining and chemical margins and higher taxation. "Downstream earnings benefited from lower costs, including the impact of favourable exchange rate effects and divestments," the firm said.
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