Shell’s Profits to Fall over Lingering Oil Price Plunge

Giant multinational oil company, Royal Dutch Shell is expected to report a near halving in profits in the last three months of 2015 following the further slide in oil prices, it said on Wednesday, January 20.

This is coming a week before shareholders meet to vote on its $47 billion deal to take over rival BG Group.

Giving preliminary estimates for results ahead of the meeting, Shell said its underlying fourth-quarter earnings on a current cost of supplies basis would be between $1.6-1.9 billion, down from $3.26 billion a year ago.

Oil prices plunged by another 24 per cent in the fourth quarter as global supplies continued to outstrip demand, further eroding oil companies’ upstream revenues.

However, BG, which also provided a short trading update on Wednesday ahead of its own shareholders’ meeting on the takeover deal next week, positively surprised investors by beating its 2015 production target.

“We believe the in-line performance of both companies should be viewed positively prior to the Shell shareholder vote,” an analysts at BMO Capital Markets who rates Shell shares as ‘underperform,’ said.

The companies aim to have cut a combined 10,000 staff and contractor jobs by the end of this year and Shell said on Wednesday that it could further cut combined capital investments below the $33 billion targeted for 2016.

Shell shareholders are set to cast their votes on the deal on January 27, followed by BG investors the next day, the final hurdles to be cleared for the deal, one of the biggest energy sector acquisitions in the past decade, to proceed.