Shell expects 4th Q profits to drop by at least 40 percent

Oil giant Royal Dutch Shell said earnings are expected to more than halve for 2015 after being hammered by plunging crude prices.

The Anglo-Dutch group said that it expects fourth-quarter earnings to be less than half those of the previous year.

Shell is the first among the so-called major oil companies to disclose financial information for its fourth quarter and full year 2015, releasing preliminary results ahead of a January 27 shareholder vote on its bid for smaller rival BG Group PLC. The price for Brent crude oil tumbled 2.8 percent in early Wednesday trading in a sign of protracted weakness in the energy markets.

Shell has said it is looking to approve new upstream oil and gas projects that will break even above $55/b as it looks to secure long-term returns in the lower oil price environment.

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.

Royal Dutch Shell plc (LON:RDSA) is an independent oil and gas company, based in the United Kingdom. The transaction was originally valued at more than $70 billion but the price tag fell as Shell’s share price declined amid anemic crude prices. A representative from Shell clarified that the 10,000 jobs are an aggregate of 7,500 job cuts announced in the third quarter of 2015 plus 2,800 announced in early December.

Norway’s US$790 billion sovereign wealth fund, the world’s largest, will vote in favour of the merger It is Shell’s fifth-biggest investor with a stake of 2.46 per cent, and BG’s second-biggest investor with a stake of 3.73 per cent.

It will report full-year results on February 4.

It reckons a combination of extracting synergies and boosting production will position it for the eventual oil price recovery and says the deal is one of the “bold, strategic moves [that] shape our industry”. Capital investment for Shell and BG combined in 2016 is now expected to be $33 billion, around a 45 per cent reduction from combined spending, which peaked in 2013.

For 2014-2015, Shell sold over $20 billion in assets, compared with a target of $15 billion, set two years ago. BG would also bring Shell an impressive portfolio of oil and gas properties in Brazil, she added. That was despite a strong contribution from Shell’s gas operation, an increasingly important and prominent aspect of the group ahead of its tie-up with BG, where earnings came in at $1.6 billion to $1.9 billion.

“We have concluded that the proposed terms of the acquisition of BG are value destructive for Shell shareholders”, David Cumming, the head of equities at Standard Life Investments in London, said.