Royal Dutch Shell plc announced on Thursday that it would be slashing organic capital investment by $15 billion over the next three years following a more than 60% slide in global crude oil prices since June 2014.
The Anglo–Dutch multinational oil and gas giant said it had options to further reduce spending, adding that it is not over-reacting to low crude oil prices and is “keeping our best opportunities on the table.”
Shell is the first of the “super majors” to report figures, and is seen as the canary in the coal mine, i.e. it is the first to give analysts an idea of current conditions and what is to come.
“Shell has delivered where it counts in 2014. We are stepping up our drive for stronger capital efficiency, whilst being careful not to over-react to the recent fall in oil prices,” Shell’s CEO Ben van Beurden said.
Shell, whose headquarters are in The Hague, the Netherlands, and registered office is in London, posted a profit of $4.2 billion for the fourth quarter, compared to $2.2 billion in Q4 of the previous year.
Profit for the full year was $22.6 billion versus $19.5 billion in 2013.
Before markets had weakened, the company informed that it had sold $15 billion’s worth of assets in 2014.
In an interview with BBC Business Editor Kamal Ahmed, Shell’s chief financial officer Simon Henry insisted his company would drill in the Arctic in 2014, after a series of legal battles and delays.
Experts believe Alaska holds the equivalent of 24 billion barrels of oil, which is enough to supply US consumption for at least three years.
Shell announced a fourth-quarter dividend of 47 cents a share, which represents an increase of 4%.
The company said earnings in its exploration and production unit were $1.73 billion, a decline from $2.48 billion, with falling prices offsetting benefits such as greater high-margin liquids production.
Its production for the quarter came in at 3.213 billion barrels a day of oil & equivalent of natural gas volumes, which was 1% lower than in the same quarter in 2013.
The company’s processing (downstream) business posted a steep rise in earnings to $1.55 billion versus $558 billion in Q4 2013.
Mr. van Beurden, who became CEO with effect from January 1, 2014, has been trying to streamline Shell by cutting costs across the board. Earlier this month, the company decided to abandon a petrochemicals plant project in Qatar.
The company had already been struggling to control high costs before crude oil prices started to fall.
Video – Ben van Beurden talks about Q4 results