Shell share price falls as second-quarter profit tumbles

Shares in Royal Dutch Shell (LON:RDSA) have lost more than three percent in London this morning as the group posted a 72-percent drop in second-quarter earnings, with weak commodity prices and costs related to the acquisition of BG Group weighing on the company performance. The results come after FTSE 100 peer BP (LON:BP) disappointed investors earlier this week, pressured by weak refining margins and low crude prices.

As of 09:24 BST, Shell’s share price had lost 3.23 percent to stand at 1,977.50p, underperforming the broader London market, with the benchmark FTSE 100 index currently 0.13 percent worse off at 6,741.82 points. The oil major’s shares have gained just under 14 percent over the past year, and are up nearly 30 percent in the year-to-date.
Shell announced in a statement this morning that its second-quarter current cost of supplies (CCS) earnings attributable to shareholders, excluding identified items, had slumped 72 percent year-on-year to $1 billion. Bloomberg reports that analysts had expected $2.16 billion. The Anglo-Dutch oil major attributed the hefty fall to the decline in oil, gas and liquefied natural gas prices, the depreciation step-up resulting from the BG acquisition, weaker refining industry conditions, and increased taxation.

Commenting on the results, Shell’s chief executive Ben van Beurden noted that lower oil prices continued “to be a significant challenge across the business, particularly in the Upstream”.
“This is a very big surprise from Shell,” Brendan Warn, a managing director at BMO Capital Markets, told Bloomberg. “Things are not looking up in the third quarter either, with weakness in the industry’s refining environment and Shell’s oil production still under pressure.”
The results come after last month, Shell, which is battling the weak oil price environment alongside peers, unveiled steeper cost cuts following its acquisition of BG, noting that it would leave up to 10 countries and would offload up to 10 percent of its oil and gas production.
Van Beurden noted today that the company was firmly on track to deliver a $40 billion underlying operating cost run rate at the end of the year.
As of 09:49 BST, Thursday, 28 July, Royal Dutch Shell Plc ‘A’ share price is 1,975.00p.