Shell CEO says sell-off strategy paying off, full year earnings fall 37%

Shell’s (RDSA) chief executive today said the oil major’s sell-off strategy was starting to pay off.

Ben van Beurden spoke as the company revealed its 2016 earnings, excluding identified items, was $7.2billion, a fall of 37% from $11.4bn in 2015. Its full year profits fell 8% to $3.5billion, down from last year’s $3.8billion profit.

The firm’s final results were negatively impacted by its fourth quarter results, which were also revealed today. Shell’s final quarter profit fell 44% to $1billion.

The company this morning confirmed it had hit the half way mark of its $30bn divestment strategy; however, Van Beurden went on to signal a return to growth, confirming Shell would spend $25billion on new projects in 2017.

The chief executive said: “We are reshaping Shell and delivered a good cash flow performance this quarter with over $9 billion in cash flow from operations. Debt has been reduced and, for the second consecutive quarter, free cash flow more than covered our cash dividend.

“Production and LNG volumes included delivery from new projects, with ramp-up continuing in 2017 and 2018. Meanwhile we are operating the company at an underlying cost level that is $10billion lower than Shell and BG combined only 24 months ago. We are gaining momentum on divestments, with some $15billion completed in 2016, announced, or in progress, and we are on track to complete our overall $30 billion divestment programme as planned.

“Looking ahead, we will further focus the portfolio and strengthen the company’s financial framework in 2017. Our strategy is starting to pay off and in 2017 we will be investing around $25billion in high quality, resilient projects. I’m confident 2017 will be another year of progress for Shell to become a world-class investment.”

 

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Cash flow from operating activities for full year in 2016 was $20.6bn. Its full year oil and gas production was 3.6 million barrels of oil equivalent per day, an increase of 24% compared to 2015.

Its gas division saw its earnings fall from $5bn to $3.7bn. Downstream’s profit fell from $9.7bn to $7.3bn.

Its upstream division booked a loss of $2.7bn.

It comes days after Shell sold its interests in a package of United Kingdom North Sea assets for a total cash consideration of up to $3.8billion, including an initial consideration of $3billion and a payment of up to $600million between 2018-2021 subject to commodity price, with potential further payments of up to $180 million for future discoveries.

A total of 400 staff members are set to transfer as part of the deal.

Last year, Shell completed a landmark $52billion takeover of BG.