Shell Profits Plunge 70% As Oil Prices Hover Around Three-Month Lows

Filled oil drums are seen at Royal Dutch Shell Plc's lubricants blending plant in the town of Torzhok, north-west of Tver. © Sergei Karpukhin / Reuters 

Royal Dutch Shell posted a 70% drop in its quarterly profits, worse than analysts had expected. The Anglo-Dutch oil major is blaming low crude prices and small refining profits.

RT News report continues:

"Lower oil prices continue to be a significant challenge across the business, particularly in the upstream (business)," said Chief Executive Ben van Beurden on Thursday.

Shell’s second-quarter profit slumped from US$3.8 billion to US$1 billion year-on-year. Analysts had expected the company would earn about US$2.2 billion.

Not only Shell’s oil business, but others divisions including gas, petrochemical and oil refining saw a steep decline. Cash flow reduced to US$2.3 billion compared with US$6.1 billion in the same period of 2015. This is not enough even to pay out US$3.7 billion in dividends.

After the acquisition of BG Group for US$54 billion, the Anglo-Dutch company’s oil production grew 28% in the second quarter. However, the takeover requires Shell to sell US$30 billion in assets in the next three years in order to maintain its dividend.

Shares in the company fell more than three percent Thursday morning after the announcement.

Shell’s results show the oil market is still under heavy pressure after Brent crude prices collapsed to below US$45 a barrel from US$114 a barrel in 2014. Companies have slashed billions of dollars from costs and cut thousands of jobs, but earnings are still plummeting.

On Thursday, prices continued to decline, as Brent oil was trading at US$43.49 and the US WTI was at US$42, hovering near three-month lows.

Oil is being dragged down by a report from the US Energy Information Administration (EIA). American stockpiles unexpectedly grew by 1.7 million barrels last week, instead of falling 2.3 million barrels as had been predicted. Gasoline inventories increased by 452,000 barrels, instead of a forecast 40,000 barrel increase.