Shell logs 44% drop in 4th quarter earnings

The results came days after Shell sealed a 47-billion-pound takeover of BG Group Plc

Royal Dutch Shell said fourth-quarter earnings tumbled 44 per cent as the collapse in oil prices took its toll on another European oil company. Profit adjusted for changes in the value of inventories and one-time items dropped to $1.83 billion from $3.26 billion in the same period a year earlier, the Anglo-Dutch energy giant said on Thursday.

The results came days after Shell sealed a £47-billion takeover of BG Group Plc, which will increase the company’s proven reserves of oil and natural gas by 25 per cent. While critics questioned the deal because of the plummeting price of oil, Chief Executive Officer Ben Van Beurden compared it to the bold moves that have defined the industry and promised it would rejuvenate Shell.

The BG deal comes as Shell and other oil companies are slashing jobs and postponing investments to adjust the bottom line to the dramatic circumstances.

Jobs will also be eliminated in the Shell-BG deal. In a trading statement unveiled just before shareholders voted on the BG merger, Shell said last month that streamlining and integration from the deal would include the loss of 10,000 staff and contractor positions across both companies in 2015-2016.

“In 2015, we significantly curtailed spending by reducing the number of new investment decisions and designing lower-cost development solutions,” Van Beurden said.

“Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that.”

Oil prices have been plunging. Brent crude, the benchmark for international oil, fell 34 per cent last year and hit a 12-year low of $27.10 a barrel in January. It traded at $33.54 on Wednesday, having been above USD 100 a barrel as recently as September 2014.

The company cut capital investment by USD 8.4 billion to USD 28.9 billion and slashed operating costs by 4.1 billion to USD 41.1 billion for 2015. The company expects another USD 3 billion in cuts this year.

Net income improved, rising 58 per cent USD 939 million The report comes amid sweeping changes for the company. Shell has exited from exploring in Alaska for the foreseeable future and cancelled the Carmon Creek heavy oil project.