Shell share price: Q1 earnings slump to $800m
Royal Dutch Shell (LON:RDSA) has updated investors on its first-quarter performance this morning, unveiling a hefty drop in earnings, with the oil price rout weighing on the company’s results.
**Highlights from Shell’s statement:**
Following completion of the acquisition on February 15, 2016, BG Group plc (“BG”) has been consolidated within Royal Dutch Shell’s results. For practical purposes, this includes February and March 2016, as the impact for the first half of February is deemed immaterial.
Royal Dutch Shell’s first quarter 2016 CCS earnings attributable to shareholders (see Note 3) were $0.8 billion compared with $4.8 billion for the same quarter a year ago.
First quarter 2016 CCS earnings attributable to shareholders excluding identified items (see page 6) were $1.6 billion compared with $3.7 billion for the first quarter 2015, a decrease of 58%.
Compared with the first quarter 2015, CCS earnings attributable to shareholders excluding identified items were impacted by the decline in oil, gas and LNG prices and weaker refining industry conditions. Earnings benefited from lower operating expenses, as steps taken by Shell to reduce costs more than offset the increase in operating expenses associated with BG.
First quarter 2016 basic CCS earnings per share excluding identified items decreased by 63% versus the first quarter 2015.
Cash flow from operating activities for the first quarter 2016 was $0.7 billion, which included negative working capital movements of $3.9 billion.
Total dividends distributed to shareholders in the quarter were $3.7 billion, of which $1.5 billion were settled by issuing 65.7 million A shares under the Scrip Dividend Programme.
Gearing at the end of the first quarter 2016 was 26.1% versus 12.4% at the end of the first quarter 2015. This increase mainly reflects the impact of the acquisition of BG.
A first quarter 2016 dividend has been announced of $0.47 per ordinary share and $0.94 per American Depositary Share (“ADS”).
Royal Dutch Shell Chief Executive Officer Ben van Beurden commented:
“Shell’s integrated activities differentiate us, with our Downstream and Integrated Gas businesses delivering strong results and underpinning our financial performance despite continued low oil and gas prices.
We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today’s lower oil price environment. The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out.
Putting all of this together, capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36% lower than combined Shell and BG investment in 2014.
Annual operating expenses excluding identified items are trending towards a run rate of $40 billion compared with 2014 combined spend of around $53 billion.
In practice, we expect to absorb BG’s capital investment and operating expenses during 2016, with no net increase overall, compared with Shell stand alone in 2015.
We will continue to manage spend, through dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together.
The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry. For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company.”
**More to follow…**
As of 07:05 BST, Wednesday, 04 May, Royal Dutch Shell Plc ‘A’ share price is 1,755.00p.