OIL major Royal Dutch Shell has missed analysts’ expectations by unveiling a $6.1 billion (£4bn) loss in the third quarter due to cancelled projects and lower oil and gas prices.
The firm revealed it had taken a hit of $8.6bn to cover the cost of halting projects such as Alaskan drilling and the Carmon Creek oil sands project in Canada.
Shell chief executive Ben van Beurden said: “These are difficult, but impactful decisions. I am determined that Shell will become a more focused and competitive company as a result.”
The result means that third-quarter earnings are 216 per cent lower than in the same quarter last year.
Van Beurden also said: “Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices on the bottom line, in what is a difficult environment for the industry today.
“We continue to improve the operational performance of our assets, and production volumes are up. Costs are falling across the company and Shell’s performance drive is delivering at the bottom line.”
The company also confirmed that its proposed £55bn takeover of BG Group remained on track for completion early next year. Van Beurden claimed it would help Shell focus on “fewer and more profitable themes”.
Nicolas Ziegelasch, head of equity research at Killik & Co, said the acquisition gives Shell a “platform” for considerable cost savings and reductions in capital expenditure in the near future. He also said market concerns over the deal are “overdone, ignoring the clear market leadership position” it will have in liquid natural gas, “with limited exposure to spot markets”.
The analyst said the energy group did not meet third-quarter expectations, and believes the results “largely reflect the continued pressure a low oil-price environment is placing on oil companies including Shell”.
The group’s results follow BP announcing on Tuesday that its underlying replacement cost profit for its third trading quarter to end-September was down by 40 per cent year-on-year.
Ziegelasch added: “We still believe in the long term Shell is better-positioned relative to the rest of the sector.”