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Shell Makes Biggest Net Loss in at Least a Decade on Price Slump

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Screen Shot 2015-10-29 at 08.02.52Rakteem Katakey: 29 October 2015

  • Company reports net loss after taking $7.9 billion charge
  • Third-quarter adjusted profit drops 70% to $1.8 billion

Royal Dutch Shell Plc reported its biggest net loss in at least a decade as it wrote down the value of assets and lowered its oil-price expectations.

The company, which is buying BG Group Plc in the industry’s largest deal this year, reported a third-quarter net loss of $7.42 billion, compared with a profit of $4.46 billion a year earlier. It took charges totaling $7.89 billion following its withdrawal from Alaskan offshore exploration and a Canadian oil-sands project.

Profit adjusted for one-time items and inventory changes dropped 70 percent to $1.8 billion, The Hague-based Shell said Thursday in a statement. That missed the $2.92 billion average estimate of 17 analysts surveyed by Bloomberg.

Europe’s biggest oil producer has cut jobs and reduced spending this year as Chief Executive Officer Ben Van Beurden prepares the company for prolonged market stagnation. Crude’s decline in the past 16 months has been brutal to the industry, driving down Shell’s market value to the lowest this decade and prompting concern that it may be overpaying for BG.

“While our cash flow and our operating performance in the quarter were strong, the headline numbers we’re reporting today include substantial charges,” Van Beurden, 57, said in the statement. “These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set.”

Average Brent crude prices fell 50 percent in the quarter from a year earlier to $51.30 a barrel, the lowest since 2009.

Shell halted its 80,000 barrel-a-day Carmon Creek oil sands project in Alberta, Canada, the company said this week. It walked away from drilling in Alaska in September after $7 billion of spending ended with a well that failed to find any meaningful quantities of oil or gas. The company’s shares retreated to a six-year low after the decision.

The producer’s B shares, the most widely traded, rose 1.2 percent to 1,742.50 pence in London on Wednesday. The stock has sunk 22 percent this year, compared with a 4.9 percent decline at BP Plc.

Shell, which is buying BG for more than $70 billion, said in July the deal will add to cash flow at $67 a barrel in 2016. The acquisition, to be completed early next year, will give Shell deepwater assets in Brazil, boost its position in Australian gas and expand its access to the U.S.’s emerging liquefied natural gas export industry. 

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