Profits at fell by 72 per cent fall in the second quarter as continued weakness in oil and gas prices weighed on the Anglo-Dutch group.
The results were much worse than market expectations and will add to the gloom hanging over the industry after weak numbers from and earlier in the week and a in oil prices below $45 per barrel.
Shell’s steep drop in earnings was especially disappointing for investors because it was the first full quarter after completion of its .
Shares in Shell fell 3.1 per cent to £19.80 after the results on Thursday morning.
The addition of BG assets helped lift production by 28 per cent to 3.508m barrels of oil equivalent per day. But this was offset by depreciation charges related to the deal as well as the weak market conditions.
On a current cost of supplies basis – the measure most closely watched by analysts – second quarter earnings were $1.05bn, down from $3.76bn in the same period last year. Analysts’ consensus forecast had been for $2.2bn.
Ben van Beurden, chief executive, said low prices “continue to be a significant challenge across the business,” particularly in upstream production. But he insisted integration of BG was going well, while cost cuts were improving underlying performance.
There was some comfort for shareholders from a quarterly dividend of 47 cents — unchanged from last year. But the financial strain on Shell was evident in the rise in its debt leverage ratio from 12.7 per cent at this time last year to 28.1 per cent now, mainly as a result of the BG acquisition.
Mr van Beurden has committed to a $30bn asset disposal plan to offset the cost of the BG deal but Shell admitted last month that the process because of the pressure from low oil prices on asset prices.
Shell said on Thursday that capital expenditure for the full year would be $29bn, compared with combined investment of $47bn by Shell and BG in 2014 — highlighting the squeeze being placed on the group.
“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,” said Mr van Beurden.
