Shell share price down, reduces spending to offset lower oil prices

Royal Dutch Shell reported on Thursday performance below expectations and announced a plan to reduce capital investments as a measure to counter falling oil prices.

The Anglo-Dutch oil company reported profit of $3.26 billion, excluding identified items, better that the $2.91 billion in the fourth quarter of 2013, but down compared to the $5.85 billion stated in the third quarter of last year. Analysts were expecting a result of $4.1 billion.

Shell is the first of big oil companies, or the “super majors”, including BP, Exxon, Total and Chevron, to reports its quarterly performance, with expectations lower crude prices, which fell nearly 60% since last summer, to have a strong impact on results.

However, Shell in particular was not expected to report lower year-on-year results due to the weak comparison base set in fourth quarter of 2013, when the company issued its first profit warning in more than ten years, prompted by low margins and high costs.

Profit in the fourth quarter came at $4.16 billion on a current cost supplies basis, similar to net income, up 93% compared to a year-ago levels, but down from the $5.27 billion in the third quarter of 2014. Full-year profit climbed 14% to $19.04 billion.

“Our strategy is delivering with good performance on our three themes of financial performance, capital efficiency and project delivery. These will remain Shell’s priorities in 2015, as we continue to balance growth and returns,” said Chief Executive Ben van Beurden.

Shell also said it will aim for stronger capital efficiency, with less spending in 2015 compared to last year. The company said it would reduce it potential capital expenditure by $15 billion over the next three years, but warned that Shell is ready to cut spending even more if needed.

The move follows similar course of action taken by fellow oil giant Total, which said it will reduce capital expenditure by 10% this year, and BP which also slashed its spending for 2015.

Since Mr. van Beurden was appointed as CEO, on January 1st 2014, Shell has taken a more conservative approach on big investments, while also reducing costs. Earlier this mouth Shell announced it had scrapped a plan to build a petrochemicals in Qatar.

Royal Dutch Shell lost 1.71% on Wednesday and closed at GBX 2 153.5 in London. The stock dropped 3.95% on Thursday to trade at GBX 2 068.5 at 12:18 GMT, marking a one-year decrease of 2.68%. The company is valued at £187.06 billion.