Royal Dutch Shell Posts Loss In Q3 Amid Lower Prices

These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set.

Royal Dutch Shell Plc will not continue construction of its 80,000 barrel per day Carmon Creek thermal oil sands project in northern Alberta because of the lack of infrastructure to move Canadian crude to market, the company said on Tuesday. Carmon Creek is 100% Shell-owned.

As a result of this decision, the company expects to take net impairment, contract provision, and redundancy and restructuring charges of $2bn in the third quarter 2015 results. Still, slumping oil prices – about 11 per cent lower now than when the takeover was announced – are starting to erode the foundations of the deal.

In a conference call with analysts, Shell’s CEO Ben Van Beurden said that this was “a very expensive dry hole” and that while there was an “unbelievably complex regulatory environment”, he said the company would look back and “try to learn from this as much as possible”.

The Brent crude index edged up Wednesday but remained below per barrel, less than half of its price from one year ago.

Shell, which is buying BG for more than $70 billion, said in July the deal will add to cash flow at $67/bbl in 2016.

Europe’s majors have reduced 2015 spending programmes about 15 percent to near $107 billion, and more cuts are seen next year.

The company took a $4.61 billion charge because of its withdrawal from offshore drilling projects in Alaska and abandoning its oil sands project in Canada. These two factors resulted in an $8 billion charge.

He noted that the company has had to make “difficult, but impactful decisions”, namely the exit from Alaska and Carmon Creek, but they will allow Shell to become a more “focused and competitive company”. The $4.1 billion write down will be in addition to the $7 billion Shell had invested in the Arctic up to this point, including $2.1 billion to acquire its license in the Chukchi Sea, where Burger J was located.

China’s economy stutters and its oil demand has dropped, but Saudi Arabia, second biggest oil producer in the world, has refused to restrain production as it tries desperately to drive U.S. shale oil producers out of business just to protect its market share. Let’s take a quick look at the numbers and what Shell is focusing on to break through this oil industry slump. The company’s worldwide realized liquids prices were 51% below their year-earlier levels and natural gas realizations fell 18% from the third quarter of 2014.

Unlike BP and Total, Shell was able to cover its capital investment and dividends with the money it earned from operations plus asset sales in the first nine months of the year.