Royal Dutch Shell said fourth-quarter earnings tumbled 44 percent as the collapse in oil prices took its toll on another global energy giant.
Profit adjusted for changes in the value of inventories and one-time items dropped to $1.83 billion from $3.26 billion in the same period a year earlier, the Anglo-Dutch company said Thursday.
The results came days after Shell sealed a $52.4 billion takeover of BG Group Plc, which will increase the company’s proven reserves of oil and natural gas by 25 percent. While critics questioned the deal because of the plummeting price of oil, CEO Ben van Beurden promised it would rejuvenate Shell.
The BG deal comes as Shell and other oil companies are slashing jobs and postponing investments to adjust the bottom line to the dramatically lower oil prices.
Jobs will also be eliminated in the Shell-BG deal and other efforts to boost competitive performance. In a statement released last month just before shareholders voted on the BG merger, Shell said that streamlining and integration from the deal and other cost cutting would include the loss of 10,000 staff and contractor positions across both companies in 2015-2016.
“In 2015, we significantly curtailed spending by reducing the number of new investment decisions and designing lower-cost development solutions,” van Beurden said. “Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that.”
Oil prices have been falling for over a year. Brent crude, the benchmark for international oil, hit a 12-year low of $27.10 a barrel in January, having been above $100 a barrel in September 2014. It traded at $33.54 on Wednesday.
Shell cut capital investment by $8.4 billion to $28.9 billion and slashed operating costs by $4.1 billion to $41.1 billion for 2015. The company expects another $3 billion in cuts this year. Net income improved 58 percent to $939 million.
Van Beurden told reporters in a webcast that he expected prices would rebound later in the year or in the early part of next year. The fundamentals point to a higher price, he said.
“Can oil prices go lower? I’m sure they can. Will they go lower? I don’t know,” he said. “If you look at … the slightly longer run, you are not going to see structurally lower oil prices in the $30s.”
The report comes amid sweeping changes for the company. Shell has exited from exploring in Alaska for the foreseeable future and cancelled the Carmon Creek heavy oil project.
Oil supplies are high even though consumption growth has tailed off, particularly in China. OPEC members, meanwhile, haven’t wanted to cut production — even at a time Iran wants to turn on the taps after decades of sanctions.
Campaign groups like Greenpeace suggest it’s time the oil companies focused on other forms of energy, citing more electric cars, solar panels, and better-insulated homes.
“Shell and BP have bet heavily on the wrong energy sources, and now they’re losing big,” Greenpeace UK’s senior climate adviser Charlie Kronick said. “The problem is that with thousands of jobs, billions in investments and people’s pensions tied up with their companies’ fortunes, Big Oil’s bosses won’t be the only ones to pay for their shortsightedness.”
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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