Shell profits down 57% in Q1

Royal Dutch Shell has reported a 57% slump in first quarter profits after it was hit by the fall in oil and gas prices.

Earnings excluding one-off items dropped from US$7.33bn in the same period last year to $3.25bn though the figure was better than City forecasts.

It comes after the Anglo-Dutch oil giant earlier this year said it was pulling nearly £10bn out of planned investment. The group revealed this month that it was buying oil and exploration group BG for £47bn.

Chief executive Ben van Beurden said: “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.

“Part of this focus is the sale of non-strategic assets. In parallel we continue to reduce our operating costs and capital spending.”

Shell saw underlying profits from its upstream exploration and production arm fall 88% to US$675m “impacted by the significant decline in oil and gas prices”.

The price of a barrel of Brent crude has fallen by half since last year.

Shell’s fall in upstream earnings was partly cushioned by one-off items including a $600m credit after UK tax breaks for the North Sea oil industry.

There was also a $1.42bn gain from disposals as Shell sells off unwanted operations.

Meanwhile there was a sharp improvement in the group’s downstream arm which includes refining and marketing activities as well as oil trading.

Underlying earnings in downstream were up 68% to $2.65bn in a better quarter for refining.

Shell’s results come two days after rival BP reported a slump in profits due to lower oil and gas prices, but which was also not as bad as expected partly thanks to a better downstream performance.

Shares rose 1%. Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: “The results are ahead of expectations.

“Like rivals including BP, the fall in the oil price has proved to be something of a double edged sword, with the earnings impacted upstream operations being partly compensated for by the tailwind given to its downstream refining business.”