Royal Dutch Shell has reported a hefty $8.2 billion charge, equivalent to around 5 percent of its market value, due to write-offs on projects in the Alaskan Arctic and Canada. As Hayley Platt reports Europe’s biggest oil producer isn’t the only oil major grappling with weak oil prices – the whole industry is gradually slipping into a loss.
Shell’s profits hit by big write-offs
It’s becoming a familiar trend…Royal Dutch Shell the latest oil major to report a major dent to profits.
Third quarter net income came in at 1.8 billion dollars – almost a billion off forecasts and 70 percent down on the previous year.
The main problem was 8.2 billion dollars worth of write-offs, that’s 5 percent of its market value.
The Alaskan Arctic venture was the costliest (Alaskan Arctic = $2.6 bln) closely followed by a Canadian oil sands project (Carmon Creek = $2bln) which was only suspended on Tuesday.
Shell’s $70 bln deal to acquire the gas-focussed BG group remains on track.
Matthew Beesley is from Henderson Global Investors
(SOUNDBITE) (English) HEAD OF GLOBAL EQUITIES, HENDERSON GLOBAL INVESTORS, MATTHEW BEESLEY, SAYING:
“BG will lower their exposure to high cost oil projects. Shell perhaps via the acquisition of BG is coping with this rather weak oil price environment better than many of their peers.”
Italian rival ENI also announced a huge hit from weak oil prices, reporting a net loss of 250 million euros in the latest quarter.
French group Total fared a bit better, raising its production forecast.
But like Shell all oil majors are finding new opportunities hard to find, says CMC Markets Jasper Lawler.
(SOUNDBITE) (English) MARKET ANALYST, CMC MARKETS, JASPER LAWLER, SAYING:
“Probably not towards shale gas. I think that area is always already slightly overdone. It’s tricky because one of the more favourable areas was traditionally Russia but that’s obviously a difficult area to invest in at the moment.”
Oil prices have halved over the last year.
It’s caused firms to slash spending and jobs.
The entire industry looks likely to slip into a loss after years of fat profits.