Shell’s Net Profit Crashes by 71% in Q2 2016

Giant Oil exploration firm, Shell has posted a drop in its net profit in the second quarter of 2016 as a result of a fall in oil prices, weak refining margins and production outages.

Net profits plunged by 71 per cent to $1.175 billion in the three months to June compared to $3.986 billion in the same part of 2015, Shell announced in a results statement.

Profit on a current cost-of-supplies (CCS) basis – which strips out changes to the value of its oil and gas inventories – slid 72 per cent to $1.045 billion in the reporting period. That was almost half of market expectations for CCS profit of $2.16 billion, according to Bloomberg News.

A 25 per cent rebound in Brent oil prices last quarter provided some relief, but the market hit three-month lows today as rising US inventories sparked resurgent supply glut fears.

“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,” chief executive, Ben van Beurden, said.

The downstream business includes refining, marketing and distribution, while upstream comprises exploration and production.

Second-quarter production stood at 3.51 million barrels of oil equivalent a day, which missed forecasts of 3.63 million as output was hit by shutdowns in Canada and Nigeria.

“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,”added van Beurden.

The lingering slump in oil prices has left energy groups across the globe with no other options than to slash spending, cut  jobs, and sell off assets.