Shell plays up BG benefits as oil price hits profits

Falling oil prices have helped send oil giant Shell's first-quarter profits into a near-60 per cent slump to $1.6 billion (£1.1bn) in the first three months of this year.

Fuel prices may have edged up recently, but Shell saw its profits slide. Picture: Ian Rutherford

Shell’s downstream business – refining, minerals and marketing – saw earnings decline to $2bn, from $2.65bn in the same period of 2015. Losses at the core exploration and production business came in at $1.4bn.

However, the battered performance came as Shell’s chief finance officer Simon Henry said two months’ profits contribution from the company’s $54bn acquisition of rival BG had already added “$200m at the bottom line”.

Shell is cutting 2,800 jobs as part of that deal, on top of the 7,500 announced beforehand to cut costs in the low oil price environment. It has said it may close three offices, including the former BG Group headquarters at Thames Valley Park, Reading; BG’s offices at Albyn Place, Aberdeen and Shell’s Brabazon House office, Manchester.

Some staff at Thames Valley Park will be moved to its headquarters in central London, while some employees at its Manchester site will be offered posts in the London office or the chance to work from home. It said it will also transfer some workers at the Albyn Place to its Tullos office in Aberdeen.

The oil price is currently at about $44 a barrel, compared with $28 last January and $115 in the summer of 2014.

The group held the dividend at 47 cents, and the earnings were slightly ahead of expectations, but its shares lost 44.5p to 1,710.5p yesterday.

Shell’s chief executive Ben van Beurden said: “Downstream and integrated gas businesses are delivering strong results and underpinning our financial performance despite continued low oil and gas prices.

“We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework.

“The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set.”