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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Shell’s Shares Fall As Q1 Earnings Plunge 58%

Royal Dutch Shell (NYSE:RDS.A) reported first-quarter earnings down 58 percent over the same quarter last year, and net income of $484 million, down from $4.43 billion, representing an 89% drop in profits and significant miss on revenue estimates.

Driven by sustained low oil prices, Shell has missed its revenue estimates, but its profit estimates were higher than analyst expectations, while it also exceeded earnings expectations in its chemical and oil refining segments.

According to Shell, profit adjusted for changes in the value of inventories and excluding one-time items dropped to $1.55 billion from $3.74 billion in the first quarter of last year.

Related: The Merger That Could Create a New Oil Major

The earnings reports drove Shell share prices down 1.71 percent on the NYSE in before-market trading this morning.

While earnings were above analyst estimates at $1.18 billion, revenue sorely missed the mark, coming in at $48.55 billion for the quarter, or some 13 percent below analyst estimates.

Shell earned $2 billion from its downstream operations, while sales of LNG were up 25 percent.

The company’s Q1 gas price realizations globally fell 36% year on year to an average of $3.58/Mcf ($3.47/MMBtu) from $5.62/Mcf in Q1 2015.

Shell’s losses were in part counter-balanced by lower operating expenses as the company cut some costs after its expensive acquisition of BG Group, for which it borrowed $52 billion in February.

Related: OPEC’s No. 2 Under Serious Threat From Political Instability

The supergiant has vowed to cut its capital investment budget by billions in order to maintain dividend payments to shareholders. Shell is eyeing $30 billion in asset sales.

"The key point going forward is expenditure and asset disposals and if those targets can be achieved," Brendan Warn, managing director at BMO Capital Markets in London, told Bloomberg. "The earnings and production from BG show they bought that company at just the right time."

By James Burgess of Oilprice.com

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