Shell has warned that its fourth-quarter profits may be 50% lower than last time with full year write-offs as high as $7bn (£5bn), underlining the damage being wreaked on the industry by low crude prices.
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.
Further losses will be taken in the last three months of the year, bringing the total amount of writedowns on the sale of assets and other one-off losses to as high as $7bn.
The dismal figures ramp up the pressure on Shell’s chief executive, Ben van Beurden, who is trying to justify the £35bn takeover of rival BG which must be agreed by more than 50% of Shell shareholders next week.
Van Beurden insisted he was pleased with Shell’s operating performance in 2015 and the momentum to reduce costs and improve competitiveness.
He also expressed confidence that shareholders would back the BG deal. He said: “Bold, strategic moves shape our industry. The completion of the BG transaction, which we are expecting in a matter of weeks, will mark the start of a new chapter in Shell, to rejuvenate the company, and improve shareholder returns.”
The merger was originally proposed when global crude prices were at $55 but they have since fallen to $28 – driven down this week by expectations of even more oil coming into the market after nuclear sanctions were dropped by the west against Iran.
In a separate announcement, BG said it would be reporting 2015 earnings of $2.3bn, a significant bounce back after losses in the previous year.
Shell, which reports its formal quarterly financial figures on 4 February, has been cutting jobs and spending over the past two years since Van Beurden arrived but has been running to catch up as global oil prices have plunged from highs of $115 in the summer of 2014.
Earlier this week the company ditched plans to jointly develop a gasfield in Abu Dhabi, which some analysts said could have been worth up to $10bn. It has already backed away from other high-cost schemes, including its controversial drilling in the Alaskan Arctic.
This article was written by Terry Macalister, for theguardian.com on Wednesday 20th January 2016 08.11 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010