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Shell Q4 profits drop by almost half

By Amanda Cooper

Shell sees Q4 profits dive by 48 per cent following lower oil and gas prices and a hefty charge on its gas assets

Royal Dutch Shell saw profits virtually halve in the final quarter of 2019, as oil and gas prices slid and after the company took hefty charges on some of its natural gas assets.

The company’s preferred measure of underlying profit dropped by 48 per cent to $2.93bn in the fourth quarter of last year.

A net $2.06bn in charges, stemming mostly from gas assets in North American and Australia, meant net income dropped by 83 percent to $965m compared with the same quarter last year.

Chief executive Ben van Beurden said Shell remained committed to its $25bn share buy-back programme, but the pace could slow.

"Our intention to complete the $25bn share buyback programme is unchanged, but the pace remains subject to macro conditions and further debt reduction," CEO Ben van Beurden said in the company’s earnings release.

Shell already warned in October that weak macroeconomic conditions and what it called a “challenging outlook” could mean the programme might not be completed within its planned 2020 timeframe.

Shares in Shell, one of the world’s largest oil and gas producers, fell by 3 percent to their lowest since mid-2017 after the announcement.

The oil price rose by nearly 12 percent in the final three months of the year, boosted by optimism over a potential truce in the ongoing trade dispute between the United States and China.

However, the average oil price in the fourth quarter was around $61.40 a barrel, compared with closer to $67 a barrel in the final three months of 2018.

All of the Shell’s major trading divisions suffered a drop in profits, with the exception of liquified natural gas.

Adding to the challenge of a difficult macroeconomic backdrop and struggling oil prices, Shell took a writedown of $1.903bn on its US shale gas assets and a drilling rig joint venture, some of which was offset by asset sales in Denmark and the US Gulf of Mexico.

The company’s bottom line was also hit by a $1.02bn writedown on its gas portfolio in Australia and Trinidad and Tobago.

“Our priorities for 2020 are unchanged. We remain committed to capital discipline as we transform Shell into a simpler company that can deliver higher returns,” van Beurden said.

FURTHER READING: Shell profit slump could slow $25bn share buyback timetable

FURTHER READING: Should investors be thinking about climate change?

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