30th Apr 2015 06:43
LONDON (Alliance News) - Royal Dutch Shell PLC Thursday said its pretax profit fell as expected in the first quarter of 2015 due to slightly lower production and the fall in oil prices, but its closely-watched current cost of supply earnings benefited from upstream divestment gains and a UK tax credit.
The FTSE-100 oil and gas major, which is in the process of acquiring BG Group PLC, reported a pretax profit of USD5.83 billion in the first quarter of 2015, a significant fall from the USD8.54 billion in the same period a year earlier, as the company's upstream division was hit by lower oil prices and lower trading contributions, partially offset by an improved performance from the downstream division.
Revenue tumbled to USD68.84 billion from USD112.07 billion due to a slight fall in production combined with the weak global oil price.
Shell's closely-watched current cost of supply earnings in the quarter reached USD4.8 billion in the first quarter of 2015, slightly up from USD4.5 billion in the same period a year earlier. However, Shell's current cost of supply earnings excluding divestment gains, tax credits and other items more than halved to USD3.2 billion from USD7.3 billion.
Compared with the first quarter 2014, current cost of supply earnings excluding identified items benefited from improved downstream results reflecting steps taken by the company to improve financial performance, higher realised refining margins, lower costs, and increased trading contributions. In Upstream, earnings were impacted by the significant decline in oil and gas prices and lower trading contributions.
The identified items include a net gain for the upstream division of USD1.86 billion which comprised of a USD1.41 billion gain on divestment and a tax credit of USD600 million in relation to the statutory tax rate reduction in the UK, partially offset by impairments of USD159 million. Downstream identified items include a net charge of USD2.58 billion.
Weaker exchange rates resulted in a hit to deferred tax positions of some USD700 million compared with the first quarter 2014, which were not included as identified items. This was partly offset by lower costs and new high-margin liquids production volumes from new deep-water projects and improved operational performance, said Shell.
Shell said its quarterly dividend would remain flat at USD0.47 per share.
"Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices. Meanwhile, in what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell," said Chief Executive Ben van Buerden.
The downstream segment experienced a 7% lift in earnings in the quarter. Shell said it continues to curtail capital investment in the division, with organic capital expenditure expected to total USD33.0 billion or less in 2015, compared to the company's original guidance of USD35.0 billion.
"In parallel we continue to reduce our operating costs and capital spending; and by deferring and reshaping new projects, we can achieve further efficiencies and savings in the global supply chain," said van Beurden.
Oil and gas production totalled 3.2 million barrels of oil equivalent per day, down 2% from a year earlier due to divestments, licenses expiring and production sharing contract price effects, alongside security impacts in Nigeria, it said. Oil products sales remained flat from a year earlier whilst chemical sales fell by 2% and refinery intake volumes were 3% lower compared with the same quarter last year.
By Joshua Warner; [email protected]; @JoshAlliance
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