Shell’s profits hit by further slide in oil prices

Royal Dutch Shell expects to report a near halving in profits in the last three months of 2015 following the further slide in oil prices, it said yesterday, a week before shareholders meet to vote on its $47bn (€43.1bn) deal to take over rival BG Group.

Giving preliminary estimates for results ahead of the meeting, Shell said its underlying fourth-quarter earnings would be $1.6bn (€1.46bn) to $1.9bn, down from $3.26bn a year ago.

Oil prices fell by another 24% in the fourth quarter, as global supplies continued to outstrip demand, further eroding oil companies’ upstream revenues.

However, BG, which also provided a short trading update yesterday ahead of its own shareholder meeting on the takeover deal next week, positively surprised investors by beating its 2015 production target.

“We believe the in-line performance of both companies should be viewed positively prior to the Shell shareholder vote,” said analysts at BMO Capital Markets, who rate Shell shares as ‘under-perform’.

The companies aim to have cut a combined 10,000 staff and contractor jobs by the end of this year and Shell said yesterday it could further cut combined capital investments below the $33bn targeted for 2016.

Shell shareholders are set to cast their votes on January 27, followed by BG investors the next day, the final hurdles to be cleared for the deal to proceed, one of the biggest energy sector acquisitions in the last decade.

Norway’s $790bn sovereign wealth fund, which is the second and fifth-biggest investor in BG and Shell, said yesterday it would vote in favour of the merger.

Many of Shell and BG’s big shareholders are onboard but a slump in oil prices has raised concerns Shell may be overpaying for the smaller rival. Shell said it expected the deal to go through within weeks. n Reuters