Shell acknowledged this morning that low oil prices pose a “significant challenge”, as they continue to hold back revenues.
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Brent crude dropped to a 12-year low of $27.10 a barrel in January.
At the same time the company pushed ahead with its £40bn takeover of gas giant BG Group.
The firm also expects to make 4.5 billion United States dollars (£3.4 billion) in efficiency savings from the merger with BG and Shell will also forge ahead with 30 billion USA dollars (£22.7 billion) of asset sales over the next two years. “However, lower oil prices continue to be a significant challenge across the business, particularly in the upstream”, said Shell Chief Executive Ben van Beurden.
Its $54 billion acquisition of BG Group in the spring helped drive up production by 28 per cent, to 3,508 barrels of oil equivalent per day. Earnings attributable to shareholders excluding exceptional items dropped 72 per cent to $1.05bn from $3.76bn.
The firm said divestments for the second quarter were $1.0 billion, highlighting the struggle to find buyers in the current oil price environment. The quarter was the first full one that included BG, which Shell bought in a roughly $50 billion acquisition that was completed in February. The purchase gave it a 20 per cent share of the global liquefied natural gas market with production facilities from Australia to the United States, as well as high-margin oil fields in Brazil.
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The stock has performed well since completing the BG deal – however, shares in the company were down 3.8 per cent in early trading. Integrated gas, which includes big liquefied natural gas developments, was also down due to lower LNG prices, which are linked to oil. The margin has shrunk to US$10.70 a barrel this month as demand growth slows and inventories build. Production shuttered by wildfires in Canada and by militant attacks in Nigeria is returning, and shale drillers in the USA are bringing back some rigs.
