Royal Dutch Shell said third-quarter profit rose 17 per cent after its acquisition of BG Group boosted oil production, helping to counter a slump in prices, while BP posted a plunge in earnings for the period.
Shell’s profit adjusted for one-time items and inventory changes advanced to Us$2.79 billion from $2.38bn a year earlier, The Hague-based Shell said Tuesday. That beat the $1.79bn average estimate of 14 analysts surveyed by Bloomberg.
The chief executive Ben Van Beurden, who completed Shell’s record purchase of BG in February, has vowed to boost savings from the acquisition and use higher cash flows to safeguard the dividend following a two-year slump in crude. While the purchase increased Shell’s production from Australia to Latin America, it also forced the company to take on billions of dollars of debt at a time when oil prices were low.
Brent averaged $46.99 a barrel in the quarter, down from $51.30 a year earlier and $47.03 in the prior three months. The decline that began in mid-2014 has compelled explorers to delay projects, cancel billions of dollars of investments and cut jobs. Prices have increased almost 7 per cent since Opec’s surprise decision to curtail output on September 28.
Mr Van Beurden has renegotiated contacts, eliminated more than 12,000 positions and started a $30bn asset-sale programme to weather crude’s collapse. The company is preparing for a “ lower forever” oil-price environment, said the head of upstream operations Andy Brown.
Shell’s B shares, the most widely traded, have increased 37 per cent in London this year. The 58-company Bloomberg World Oil & Gas Index has advanced 10 per cent in the period.
Shell completed the acquisition of BG for $54bn on February 15. The purchase gave it a 20 per cent share of the global liquefied natural gas market as well as high-margin oil fields in Brazil.
In stark contrast to Shell, rival oil major BP reported a 49 per cent decline in third-quarter earnings after crude prices fell and refining margins shrank.
Profit adjusted for one-time items and inventory changes dropped to $933 million from $1.8bn a year earlier, the London-based company said on Tuesday. That beat the $719.2m average estimate of 14 analysts surveyed by Bloomberg.
BP’s earnings have fallen year-on-year for nine consecutive quarters, piling pressure on the chief executive Bob Dudley to rein in spending and sell assets without jeopardising future growth. Oil’s rally is fading and BP and its peers will need to continue cutting spending so they can maintain dividend payouts.
BP is renegotiating contracts and reducing the size of projects to lower costs, and plans to maintain 75 per cent of all cost cuts even when prices rise in the future.
* Bloomberg
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