The company warned in Wednesday’s update that fourth quarter profits are set to be around 40% lower than a year ago, between $1.6 billion and $1.9 billion. The company expects 2015 dividends to be $12 billion in total, or $1.88 per share.
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“I’m pleased with Shell’s operating performance in 2015, and the momentum in the company to reduce costs and to improve competitiveness”, said group chief executive Ben van Beurden.
In the first preliminary results to be reported this year by any of the large oil companies, Shell said it expected earnings to come in at between $1.6bn and $1.9bn and full-year numbers as low as $10.4bn.
“Shell has reiterated its determination to see the BG deal through, despite some concerns around the viability of the transaction given a depressed oil price which is under continuing pressure”, Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said in an email.
“It is clear today that operationally and financially, both Shell and BG are maneuvering through this down-cycle reasonably well”, said Bernstein Research in a note. BG, the U.K.’s third-biggest oil and gas producer, is one of the few companies where output is increasing, a boon for Shell.
He added the group has been slashing costs to bolster its bottom line, stripping out $4bn from the business in 2015 and planning to cut a further $3bn this year. Shell’s downstream income held steady from $1.55 billion to a range of $1.4 billion to $1.6 billion.
Identified items for the fourth quarter 2015 are expected to be around a net charge of US$200mln to an immaterial gain, mainly reflecting gains on sale of assets and impairments and for the full year 2015 are expected to be a net charge of some US$6.8bn-US$7bn. The acquisition allows The Hague-based Shell to accelerate the reshaping of its portfolio toward deepwater assets and gas, and BG’s production is likely to grow strongly in the next three to five years, Invesco fund manager Martin Walker said.
The Anglo-Dutch group said that it expects fourth-quarter earnings to be less than half those of the previous year.
Shell is slashing thousands of jobs, selling assets worth billions and exiting projects as oil prices plunge. BG notched up a 16% increase in production in 2015 to 704,000 barrels of oil equivalent a day.
This compares with net profit of nearly $15.0 billion in 2014.
The markets reacted badly to the news in early trading, down just over 5 percent to 1,291 pence by mid-morning in London.
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It needs to garner 50 per cent support for the deal to proceed after having received all of the necessary regulatory clearances, something that is likely but not a foregone conclusion.
