The continuing crude oil price slump – plus huge write-offs for pulling out of exploration in Canada and Alaska – today propelled Shell into a third-quarter loss of $6.1 billion.
This more than wipes out profits of $5.3 billion in the same period last year after the oil giant wrote off $8.6 billion – around 5% of its entire market value – in abortive exploration in north America.
The oil major’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% lower than a year ago.
Shell’s upstream oil and gas production division, swung to a loss for the first time in years. Its downstream refining and marketing division, however, benefited from weak prices to run refineries more profitably, with its net income up 46% at $2.6 billion.
Unlike some of its rivals, Shell made no further change to its $30 billion capital expenditure forecast for this year, which it cut earlier in the year from $35 billion.
Shell’s finance director Simon Henry said it has been a ‘challenging quarter’.
In April, Shell announced it had agreed to buy oil and gas exploration firm BG Group in a deal that values the business at £47 billion.
Looking to the future, Shell chief executive Ben van Beurden, said: “The BG deal, which remains on track for completion in early 2016, is a springboard to focus Shell into fewer and more profitable themes, especially deep water and integrated gas.”
Jason Gammel, oil and gas equity analyst at Jefferies, commented: “It’s a rather messy set of results, but it’s what I expected given some of the portfolio steps they have taken and it cleans up the balance sheet in advance of the BG merger”.