Hague-based LNG giant Shell posted on Thursday its second-quarter results revealing a sharp decline in its net income on low oil, gas and LNG prices.
Shell’s second quarter earnings on a current cost of supplies (CCS) basis plunged 93 percent to just $239 million.
The company’s adjusted earnings, excluding one-off items such as proceeds from divestments, dropped 72 percent to $1.05 billion from $3.8 billion a year earlier.
These results are Shell’s second following the multi-billion takeover of BG earlier this year which created the world’s largest liquefied natural gas company.
Shell announced an interim dividend of $0.47 per A ordinary share and B ordinary share, equal to the US dollar dividend for the same quarter last year.
“Downstream and Integrated Gas businesses contributed strongly to the results, alongside Shell’s self-help programme. However, lower oil prices continue to be a significant challenge across the business, particularly in the Upstream,” said Ben van Beurden, CEO of Shell.
“We are managing the company through the down-cycle by reducing costs, by delivering on lower and more predictable investment levels, executing our asset sales plans and starting up profitable new projects. At the same time, integration of Shell and BG is making strong progress, and our operating performance continues to further improve.”
According to van Beurden, the company is making “significant and lasting changes to Shell’s working practices and cost structure. Shell is firmly on track to deliver a $40 billion underlying operating cost run rate at the end of 2016.”
LNG volumes up
Second quarter earning for Shell’s Integrated Gas segment, excluding a net gain of $114 million, were $868 million compared with $1.4 billion a year ago.
Earnings were impacted by the decline in oil and LNG prices, and increased depreciation including a step-up resulting from the BG acquisition, according to Shell.
Second quarter 2016 production was 880 thousand boe/d compared with 604 thousand boe/d a year ago. Liquids production increased by 10 percent and natural gas production increased by 63 percent compared with the second quarter 2015.
LNG liquefaction volumes of 7.57 million tonnes increased by 39 percent compared with the same quarter a year ago, mainly reflecting the impact of the acquisition of BG, including an increase associated with Queensland Curtis LNG in Australia and Atlantic LNG in Trinidad and Tobago, Shell said.
LNG sales volumes of 14.25 million tonnes increased by 52% compared with the same quarter a year ago, mainly reflecting Shell’s enlarged portfolio after the acquisition of BG.
Compared with the third quarter 2015, Integrated Gas earnings are expected to be negatively impacted by a reduction of some 15 thousand boe/d associated with the impact of maintenance, Shell said.
LNG World News Staff