Royal Dutch Shell profits down sharply in second quarter

Royal Dutch Shell today said its profit took a sharp fall in the second quarter due to lower oil and gas prices despite a strong performance in marketing and refining.

The oil giant added it would cut its capital investment and eliminate 6,500 jobs as the drop in oil and gas prices hit its vast global exploration and production operations.

According to oil giant, earnings adjusted for inventory changes and excluding one-time items stood at $3.8 billion, as against $6.1 billion in the same period in 2014.

The company's earnings came in at just $1 billion in the quarter from oil and gas exploration and production, as against $4.7 billion a year earlier.

Its average revenues from a barrel of oil were 48 per cent lower than a year earlier, while those from natural gas, an important earner for Shell, were down 31 per cent.

According to Shell executives, they were waiting out what could be a long period of low oil prices.

The company also sought to address investor concerns that the $70-billion acquisition of British oil and gas producer BG Group could prove ill-timed. The company, in April agreed to buy BG, which at one time formed part of British Gas and was a lead player in liquefied natural gas.

''We will reshape the company once this transaction is complete,'' Ben van Beurden, Shell's chief executive, said in a statement.

According to Beurden, with the BG acquisition, which brought promising development prospects in Brazil and elsewhere, Shell would be able to cut exploration spending leading to wide-ranging asset sales of $30 billion between 2016 and 2018.

Royal Dutch Shell's  second quarter 2015 earnings, on a current cost of supplies (CCS) basis, were $3.4 billion compared with $5.1 billion for the same quarter a year ago.

Second quarter 2015 CCS earnings excluding identified items were $3.8 billion compared with $6.1 billion for the second quarter 2014, a decrease of 37 per cent.

Compared with the second quarter 2014, CCS earnings excluding identified items benefited from strong Downstream results reflecting steps taken by the company to improve financial performance and higher realised refining margins.

Its upstream earnings were impacted by the significant decline in oil and gas prices and decreased production volumes, partly offset by lower costs and depreciation.

Basic CCS earnings per share excluding identified items decreased by 37 per cent versus the same quarter last year.

Cash flow from operating activities for the second quarter 2015 was $6.1 billion, compared with $8.6 billion for the same quarter last year. Excluding working capital movements, cash flow from operating activities for the second quarter 2015 was $7.6 billion, compared with $11.0 billion for the second quarter 2014.

Total dividends distributed to Royal Dutch Shell plc shareholders in the quarter were $3.0 billion, of which $0.7 billion were settled under the scrip dividend programme.

No shares were bought back during the second quarter.