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Global Energy Advisory October 14th 2016

Global Energy Advisory October 14th 2016

Russia and Turkey this week…

Shell’s Q2 Profits Crumble, Misses Estimates By $1B On Oil Price Sting

Oil Storage

As lower oil prices continued to challenge its business, Royal Dutch Shell reported on Thursday a second-quarter net profit tumbling 72 percent on the year, missing analyst estimates by more than US$1 billion.

Current cost of supplies, Shell’s definition of a net income, plunged to US$1.0 billion from US$3.8 billion for the second quarter of 2015. Analysts had expected a net profit of US$2.16 billion.

The persistently low oil prices are still a significant challenge across the business, especially in the upstream segment, Shell’s chief executive Ben van Beurden said in the company statement. In addition, Shell attributed the earnings dive to increased depreciation with the acquisition of BG Group, weak refining market, and higher taxation.

The group booked a US$1.325-billion loss in the upstream business, much wider than the loss of US$ 469 million it had reported for the second quarter last year.

Earnings in the downstream division plummeted to US$1.8 billion from US$ 2.96 billion and profits for the integrated gas business dipped to US$ 868 million from US$ 1.4 billion.

The US$54-billion acquisition of BG Group, which Shell completed in February this year, lifted Shell’s gearing – that is net debt as a percentage of total capital – to 28.1 percent at end-June 2016, from 12.7 percent at the end of the second quarter last year.

For the third quarter of 2016, Shell is not looking up either, and sees gas earnings affected by output reduction due to maintenance. The group also expects its upstream business to suffer from lower output, due to oil infrastructure sabotages and outages in Nigeria. Should security conditions continue to deteriorate, Shell expects further impact on upstream earnings.

Refinery availability, on the other hand, is seen slightly up on lower planned maintenance. The group forecasts its oil product sales volumes to drop by some 200,000 bpd in the third quarter compared to the third quarter of 2015, as a result of asset sales in Denmark, Norway and France.

By Tsvetana Paraskova for Oilprice.com

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