Merger takes toll
BG costs take bite out of Shell profits
The company’s cost of supplies excluding identified items, its preferred way of measuring profit, was $1.8 billion in the fourth quarter, against analyst expectations of $2.8 billion.
Royal Dutch Shell chief executive Ben van Beurden, 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 $10 billion lower than Shell and BG combined only 24 months ago.
“We are gaining momentum on divestments, with some $15 billion 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 $25 billion in high quality, resilient projects. I’m confident 2017 will be another year of progress for Shell to become a world-class investment.”
> Plexus Holdings, the AIM quoted Scottish oil and gas engineering services business, has secured a two year extension to its existing contract to supply wellhead and mudline equipment to Brunei Shell Petroleum.
It is the fourth Plexus has signed with BSP and is an extension of the current four-year framework agreement between both parties, which began in late 2012.
Plexus CEO Ben van Bilderbeek said, “The extension of our framework agreement with BSP validates our confidence in our ability to maintain relationships with long term customers, and be ready to secure orders when there is business to be won.
“This belief is based on the successful application of our best in class wellheads on over 400 exploration wells worldwide in both HPHT and standard pressure environments by a roster of blue-chip operators including Shell, Centrica, Statoil, and Total.”
The contract is announced after its shares plunged 20% on a profits warning. It said revenues for the year ending on 30 June are running “materially behind expectations”.