Shell, whose shareholders last week approved its takeover of rival
BG Group, said 2015 income fell 87 percent to $1.94 billion, in line
with analysts' estimates, as its oil and gas production unit took a
big hit from slumping oil prices.
Shares in Shell, which offer a dividend yield of above 8 percent,
were trading up 6.4 percent at 5.36 a.m. ET, outperforming the
European oil and gas company index which was up 3.4 percent.
"Most divisions came in towards the top end of management's guidance
range, which we view as positive," said Biraj Borkhataria, equity
analyst at RBC Capital Markets.
Shell's earnings are the latest demonstration of how badly oil
producers are suffering from a 75 percent fall in oil prices since
mid-2014. The world's largest oil company, ExxonMobil, this week
reported its smallest quarterly profit in more than a decade, while
BP's 2015 loss was its biggest ever.
Norway's Statoil said on Thursday it would cut 2016 capital
expenditure (capex) by $1.7 billion year on year, while U.S.
producer ConocoPhilips reduced its quarterly dividend.
"Shell will take further impactful decisions to manage through the
oil price downturn, should conditions warrant that," Chief Executive
Ben van Beurden said in a statement. Shell maintained its annual
dividend payment of $1.88 per share.
Shell is reducing investment, cutting nearly 10,000 jobs and selling
assets to cope with the downturn. The CEO told reporters he believed
oil prices had reached, or were near, the bottom of the cycle,
pointing to growing demand.
In order to lower spending, Shell has scrapped multi-billion pound
projects over the past year, including a controversial exploration
project in the Alaskan Arctic Sea, the Bab sour gas field in Abu
Dhabi and Carmon Creek oil sands project in Canada.
The company approved only four new projects last year and investment
decisions are expected to remain scarce in 2016.
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This strategy has started to drag down Shell's reserve replacement
ratio, a metric used to reflect new reserves added relative to the
amount produced, which was negative in 2015 for the first time in
around 12 years.
"While we're not entirely comfortable with a negative number, it's
not the most important thing today," Shell Chief Financial Officer
Simon Henry told reporters.
He said the additions of BG's reserves once the takeover completes
Shell maintained its $33 billion combined Shell-BG capital
expenditure budget for 2016. Capital spending fell to $28.9 billion
in 2015, down $8.4 billion year on year.
Shell's fourth-quarter current cost of supplies (CCS)earnings
excluding identified items, its preferred way of measuring profits,
fell 44 percent to $1.83 billion. Its downstream business benefited
from lower fuel prices, contributing a profit of $1.5 billion in the
Shell sold $5.5 billion worth of assets in 2015, it said.
(Editing by Jason Neely and Elaine Hardcastle)
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