Shell Profit Free Falls 44%, as Crude Plummets

Royal Dutch Shell, which is nearing the completion of the largest deal in the oil industry in the past decade, posted its profit for the fourth quarter that matched estimates on Wall Street.

Shares were up the most in close to seven years amidst a rebound in stock worldwide and a dollar sell off.

Profit that was adjusted for items that were one-off and changes in inventory shrank by 44% to just over $1.8 billion, near its midpoint of the range of between $1.6 billion and $1.9 billion it released in January, said Shell officials on Thursday.

The collapse of crude has slashed company earnings from BP to Exxon Mobile to Chevron, leaving them all struggling to find a balance between making investments for growth and making payout to shareholders.

Shell, based in The Hague, is betting its acquisition of $50 billion for the BG Group will help the company maintain its dividends and to increase its production of gas and oil during a time when cash flow has shrunk.

BG is now becoming important for Shell, as it will help them grow as well as high-grade assets, said an oil industry analyst in London on Thursday.

He added that it gave Shell the opportunity to divest its assets that are high cost and to focus on the high-margin products of BG.

Shareholders at Shell in January approved the company plan to acquire BG, which has Brazilian oil fields and assets in natural gas from Kazakhstan to Australia, despite the tumble of 40% in prices of crude since the company first announced the deal.

The average price for Brent crude during the fourth quarter was $44.69 per barrel, which was its lowest since early 2004.

The average prices have dropped by over $10 in this quarter, making it more difficult to deliver on promises to its investors, said a Shell spokesperson.

The drop in crude prices has hit the earnings of companies across the globe. Norway’s largest oil company, Stateoil ASA announced on Thursday its adjusted profit during the fourth quarter had dropped 63% and missed estimates of analysts.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with our FREE daily email newsletter.