Shell’s Q3 profit climbs 18 pct

Hague-based LNG giant Shell on Tuesday said its third-quarter profit rose 18 percent on year, boosted by the multi-billion takeover of BG Group earlier this year.

Shell’s third quarter earnings on a current cost of supplies (CCS) basis were at $2.8 billion compared with $2.4 billion for the third quarter of 2015.

According to Shell, the profit rose due to increased production volumes mainly from BG assets. The results were partly offset by the decline in oil, gas and LNG prices, and increased depreciation mainly resulting from the BG acquisition, the company noted in its statement.

These results are Shell’s third following the purchase of BG in February. The deal between BG and Shell created the world’s largest LNG company.

“Shell delivered better results this quarter, reflecting strong operational and cost performance. But lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain,”  said Ben van Beurden, CEO of Shell.

“The integration of Shell and BG is now essentially done and has been completed well ahead of plan. It’s been an important catalyst for the significant and lasting changes we are making to the company’s working practices, cost structure and portfolio.”

The CEO noted that, in parallel with the integration, “we have been managing the company through the down-cycle by reducing costs and investment levels, while executing our asset sales plans and starting up new projects.”

According to van Beurden, Shell’s underlying operational costs in 2016 are already at an annualised run rate of $40 billion, $9 billion lower than Shell and BG costs in 2014. They’re set to reduce further on a like-for-like basis as deal synergies and improvements are delivered in full.

“Meanwhile, 2016 organic capital investment – which includes $3 billion in non-cash items – will be around $29 billion, some $18 billion below 2014 Shell and BG levels. Capital investment for 2017 is expected to be around $25 billion which is at the low end of our $25-$30 billion range,” van Beurden said.

Shell is also working on 16 material asset sales as part of the company’s planned $30 billion divestment programme.

“When fully ramped up, projects started up in 2016 are expected to add more than 250 thousand barrels of oil equivalent per day (boe/d). Cash flow from new projects started up between 2014 and 2018 is expected to total $10 billion in 2018, at an average $60 oil price, van Beurden added.

LNG sales above 15 million tonnes

Third quarter earnings for Shell’s Integrated Gas segment, excluding a net charge of $317 million, were $931 million compared with $918 million a year ago.

Compared with the third quarter 2015, earnings rose due to higher LNG and liquids production volumes related to the contribution of BG assets, Shell said in the statement.

Third quarter production was 912 thousand boe/d compared with 661 thousand boe/d a year ago. Liquids production increased by 5% and natural gas production increased by 54% compared with the third quarter 2015.

Shell’s LNG liquefaction volumes of 7.70 million tonnes increased by 45% compared with the same quarter a year ago. Shell attributed this to the impact of the BG acquisition, including an increase associated with Queensland Curtis LNG in Australia and Atlantic LNG in Trinidad and Tobago.

LNG sales volumes of 15.23 million tonnes increased by 54% compared with the same quarter a year ago, Shell said in the statement.

LNG World News Staff