Shell’s Q4 profit down, LNG sales up

The Hague-based LNG giant Shell on Thursday said its fourth-quarter profit dropped 44 percent year-on-year.

Shell’s 2016 fourth-quarter earnings on a current cost of supplies (CCS) basis were at $1 billion compared with $1.8 billion in the same quarter of 2015.

“Earnings were impacted by charges of $0.5 billion related to deferred tax reassessments which were not included as identified items,” Shell said in a statement.

Excluding these items, fourth-quarter earnings were $1.8 billion compared with $1.6 billion in the year before, an increase of 14 percent.

For the full-year of 2016, earnings attributable to Shell’s shareholders were $3.5 billion compared with $3.8 billion in 2015. Excluding identified items, full-year earnings were $7.2 billion
compared with $11.4 billion in 2015.

These results are Shell’s fourth following the purchase of BG Group in February last year. The deal between BG and Shell created the world’s largest liquefied natural gas (LNG) company.

“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,” Ben van Beurden, chief executive officer of Shell, said.

“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,” van Beurden said.

Looking ahead, the CEO said that Shell would further focus its 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,” he added.

LNG sales on the rise

Fourth-quarter earnings for Shell’s Integrated Gas segment, excluding a net charge of $120 million, were $907 million compared with $1.24 billion a year ago.

Earnings excluding identified items were impacted by the depreciation step-up resulting from the BG acquisition and an increase associated with the start-up of Gorgon LNG plant in Australia, Shell said, adding that the impact of higher oil prices was “more than offset by the decline in LNG prices.”

Fourth quarter 2016 production was 908 thousand boe/d compared with 633 thousand boe/d a year ago. Liquids production increased by 10% and natural gas production increased by 60% compared with the fourth quarter 2015.

Shell said its LNG liquefaction volumes of 8.57 million tonnes increased by 51 percent compared with the same quarter a year ago, reflecting the impact of the acquisition of BG, and including an increase associated with Queensland Curtis LNG in Australia, Atlantic LNG in Trinidad and Tobago, and the start-up of Gorgon in Australia.

LNG sales volumes of 15.34 million tonnes increased by 51 percent compared with the same quarter a year ago.

For the full-year of 2016, LNG liquefaction volumes rose 37 percent to 30.88 million tonnes while LNG sales volumes increased 46 percent to 57.11 million tonnes.

LNG World News Staff