Shell’s second-quarter, first-half earnings take dive

Royal Dutch Shell PLC reported second-quarter earnings on a current cost of supplies (CCS) basis, excluding identified items, of $1.05 billion, down from $3.76 billion in second-quarter 2015. First-half earnings on a CCS basis, also excluding identified items, totaled $2.6 billion, down from $7.5 billion in the same period last year.

The multinational firm says second-quarter earnings were impacted by the decline in oil, gas, and LNG prices; the depreciation step-up resulting from the BG PLC acquisition; weaker refining industry conditions; and increased taxation. Earnings benefited from increased production volumes from BG assets.

Excluding identified items, the firm’s integrated gas division recorded second-quarter earnings of $868 million, down from $1.4 billion in first-quarter 2015. Its first-half earnings were $1.86 billion, down from $2.89 billion a year earlier.

Separately, Shell and its partners this month delayed final investment decision (FID) for the LNG project near Kitimat in Canada, citing “global industry challenges, including capital constraints (OGJ Online, July 12, 2016).” Upon its release of second-quarter earnings, Shell said it will also delay FID for its Lake Charles LNG project.

Compared with the year-ago period, integrated gas earnings in the third quarter are expected to be negatively impacted by a reduction of some 15,000 boe/d associated with the impact of maintenance.

The upstream division took a second-quarter loss, excluding identified items, of $1.33 billion compared with a $469-million loss a year earlier. Its first-half loss totaled $2.76 billion compared with $664 million a year ago.

Upstream earnings in the third quarter are expected to be negatively impacted by a reduction of some 35,000 boe/d associated with sabotage incidents and repairs in Nigeria. Earnings could be further impacted if the security conditions continue to deteriorate.

The firm’s oil and gas production for the second quarter was 3.51 million boe/d, an increase of 28% compared with second-quarter 2015. The impact of BG on the second quarter production was an increase of 768,000 boe/d.

Excluding identified items, the downstream division posted first-quarter earnings of $1.82 billion, down from $2.96 billion in first-quarter 2015. Its first-half earnings were $3.83 billion, down from $5.61 billion in the year-ago period.

Refinery availability is expected to marginally increase in the third quarter as a result of lower planned maintenance compared with the same period a year ago. Chemicals manufacturing plant availability is expected to increase in the third quarter driven by the planned restart of the Bukom chemical site in Singapore compared with third-quarter 2015, which was heavily impacted by unit shutdowns at the Moerdijk chemical site in the Netherlands.

Second-quarter capital investment was $6.3 billion. Half-year capital investment was $65.3 billion, which included $52.9 billion related to the acquisition of BG. Organic capital investment for the full year is expected at $29 billion compared with combined capital investment of $47 billion in 2014. Divestments for the second quarter were $1 billion.

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