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Shell Expects Sharply Lower Profit Amid Oil Slump

 

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By STANLEY REEDJAN. 20, 2016

LONDON — Royal Dutch Shell said on Wednesday that it expected profit for the fourth quarter of last year to be sharply lower than in the same period in 2014.

The company issued the preliminary estimates before a much-anticipated vote by Shell shareholders next Wednesday on the proposed acquisition of the BG Group, an oil and gas producer based in England.

Shell estimated that its profit for the quarter, excluding inventory changes and one-time charges, would fall around 50 percent, to between $1.6 billion and $1.9 billion, as lower oil prices cut sharply into revenue. The company posted profit of about $3.3 billion in the fourth quarter of 2014.

The company, which is based in The Hague, estimated that profit for all of 2015 would be between $10.4 billion and $10.7 billion, sharply down from about $22.6 billion in 2014.

Shell also said that it planned to take write-offs in the range of $7 billion. Lower oil and gas prices are leading companies to reduce the value at which they carry assets on their books. The company plans to release its official results on Feb. 4.

Investors have been skeptical about the BG deal, which was announced in April, when oil and gas prices were much higher. The acquisition was priced at $70 billion.

Ben van Beurden, Shell’s chief executive, has staked his credibility on the completion of the acquisition. He has argued that the BG deal makes sense for long-term competitive reasons, and that oil prices will eventually rise substantially above current prices, which are under $30 a barrel. Shell has estimated that it would break even on the acquisition with oil prices at $60 a barrel.

“Bold, strategic moves shape our industry,” Mr. van Beurden said in a statement on Wednesday. He said the BG deal would “mark the start of a new chapter in Shell, to rejuvenate the company and improve shareholder returns.”

European stocks slid again on Wednesday as oil prices lost more ground. Shares of European energy companies were among the worst performers. Shell’s shares were 3.7 percent lower in early trading, and BG shares were 2.4 percent lower.

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