Shell suffers vast Q3 loss after scrapping projects

In this Monday, April 7, 2014 file photo, a flag bearing the company logo of Royal Dutch Shell, an Anglo-Dutch oil and gas company, flies outside the head office in The Hague, Netherlands. AP FILE PHOTO

LONDON, United Kingdom—Shell dived into a $7.4-billion third-quarter net loss on huge write-downs after scrapping costly projects in Alaska and Canada, and on falling oil and gas prices, it said Thursday.

READ: Shell says it will cease Alaska offshore Arctic drilling

The loss after taxation—equivalent to 6.7 billion euros—in the three months to September contrasted with a net profit of $4.5 billion in the same period of 2014, Royal Dutch Shell said in a statement.

Profit adjusted for one-off items and inventory changes plunged 70 percent to $1.77 billion, dashing market expectations of almost $3.0 billion and sending its share price spiralling lower.

The Anglo-Dutch energy giant took a net charge of $8.2 billion mainly related to its decision to halt key projects, alongside a downward revision to the oil and gas price outlook.

READ: Shell halts Canada oil sands project

Shell had announced Tuesday it would halt construction of its Carmon Creek thermal oil sands venture in Canada due to “uncertainties” facing the project, including a lack of infrastructure.

‘More competitive’

“We have halted exploration activities offshore Alaska, and stopped the construction of the Carmon Creek in-situ oil project in Canada,” said Shell chief executive Ben van Beurden.

“These are difficult, but impactful decisions. I am determined that Shell will become a more focused and competitive company as a result.”

The cancellation of the 80,000 barrel per day Carmon Creek project came after the Anglo-Dutch oil major halted its search for oil off the Alaskan coast last month at a cost of several billion dollars.

Shell revealed Thursday that it took a $2.6-billion charge for Alaska, and a $2.0-billion hit for Carmon Creek.

It also took impairment charges totalling almost $3.7 billion that were triggered by the “downward revision of the long-term oil and gas price outlook.”

That included $2.3 billion of charges linked to North American shale gas activities.

The London-listed energy major confirmed however that its proposed £55-billion takeover of BG Group remained on track for completion in early 2016.

Van Beurden said the BG takeover would help Shell focus on “fewer and more profitable themes,” specifically deep water and integrated gas.

‘Difficult’ industry environment

With oil prices plunging on the back of a global glut, energy majors like BP and Anglo-Dutch rival Shell have been slashing investment and jobs.

BP had revealed earlier this week that profits collapsed in the third quarter, forcing it to scale back investment and sell more assets.

BP’s net profit dived 64 percent to $46 million in the three months to September, compared with $1.29 billion a year earlier.

“Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices … in what is a difficult environment for the industry today,” added van Beurden on Thursday.

“We continue to improve the operational performance of our assets, and production volumes are up. Costs are falling across the company and Shell’s performance drive is delivering at the bottom line.”

In early afternoon trade, Shell’s ‘A’ share price slid 2.50 percent to 1,694.50 pence on London’s FTSE 100 index, which was down 1.0 percent in value.

“Shell’s Q3 results painted a picture very much reflective of the woes of the oil industry,” said analyst Helal Miah at The Share Centre.

“Whilst these results are a little disappointing, we believe Royal Dutch Shell is taking the right steps in a low oil price environment, reigning back on large scale investment projects and cutting costs.”