Shell sees 2015 earnings slide by more than half

Royal Dutch Shell PLC expects its full-year 2015 earnings on a current cost of supplies (CCS) basis excluding identified items at $10.4–10.7 billion, down from $22.6 billion in 2014.

Cash flow from operating activities for the year is anticipated at $29.2–30.4 billion. Production is seen at 2.9 million boe/d.

Shell’s fourth-quarter earnings are expected at $1.6–1.9 billion, including $400-500 million for upstream and $1.4-1.6 billion for downstream.

Ben van Beurden, Shell chief executive officer, noted that the company has reduced operating costs by $4 billion, or about 10%, in 2015, and anticipates an additional $3 billion cut in 2016.

Gearing up for the merger

“Synergies from the BG [Group PLC] combination will be in addition to that,” Van Beurden explained, adding that he expects completion of the deal “in a matter of weeks.” Shell and BG shareholders are respectively expected to vote on the merger on Jan. 27 and 28.

Van Beurden reaffirmed Shell’s plans amid the integration to reduce some 10,000 staff and direct contractor positions in 2015-16 across both companies (OGJ Online, Dec. 14, 2015).

Capital investment for Shell and BG together in 2016 is expected at $33 billion, a 45% reduction of combined spending, which peaked in 2013. On its own, Shell’s capital investment in 2015 is expected at $29 billion, an $8 billion, or 20%, cut from 2014 levels.

BG separately estimated for 2015 business performance earnings of about $1.7 billion, total results earnings of at least $2.3 billion, and net cash flow from operating activities of about $4.3 billion.

BG reported capital investment on a cash basis of about $6.4 billion, lower than guidance of about $6.5 billion. The company’s average production volumes for 2015 are estimated at 704,000 boe/d, ahead of the guidance of 680-700,000 boe/d.

Divestments by Shell for 2014-15, meanwhile, now total more than $20 billion, well above the original plan of $15 billion set in 2014. “Preparations are well advanced for $30 billion of asset sales in 2016-18, assuming the successful completion of the combination,” Van Beurden said.

Shell also in 2015 set out to reduce what it describes as “longer-term, low return upstream positions,” namely exiting Alaska exploration for the foreseeable future (OGJ Online, Sept. 28, 2015), cancelling its Carmon Creek heavy oil project (OGJ Online, Oct. 28, 2015), and exiting its shale positions in multiple countries.

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