Shell’s profits hit by big Arctic, Canadian write-offs

29 Oct 2015 | Author: | No comments yet »

Low Oil Prices Take a Toll on Royal Dutch Shell.

LONDON — Lower petroleum prices are shaking up the plans and bottom lines of the world’s biggest oil companies, and Royal Dutch Shell is the latest to show the effects. Shell’s third-quarter current cost of supplies earnings, the company’s definition of net income, came in at $1.8 billion, below analysts’ expectations of $2.74 billion and 70 per cent lower than a year ago. “These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set,” Shell chief executive Ben van Beurden said in a statement. The $8.2 billion charge included a $2.6 billion write-off for Shell’s withdrawal from its exploration programme in the Alaskan Arctic Sea in July, as well as an additional $2 billion charge over the Carmon Creek oil sands project in Canada which the company suspended on Tuesday. Its downstream division, however, benefited from weak prices to run refineries more profitably, with its net income reaching $2.6 billion, up 46 per cent year on year.

Italian rival ENI on Thursday also announced a huge hit from weak oil prices as it swung to a net loss, while French oil producer Total fared better than expected and raised its production forecast. Shell said its bumper $70 billion takeover deal for smaller gas-focused rival BG Group remained on track for completion early next year as it awaits regulatory approvals from China and Australia. Carmon Creek was intended to produce 80,000 barrels of oil a day, a very substantial amount, by heating heavy oil underground and pumping it out, a process that requires large amounts of capital upfront but then usually produces oil for decades. The company had long insisted that the offshore promise of Alaska made it worthwhile to bear the disapproval of environmental groups and to incur the huge costs of operating in the difficult Arctic environment. Even without the big write-offs, Shell’s exploration and production unit lost $425 million for the quarter, compared with a profit of $4.3 billion a year earlier.

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