Although Shell beat analyst growth forecasts in the third quarter the company’s top brass have warned that slumping oil prices could squeeze revenues moving forward.
Shell’s coffers could take up to an $8 billion hit if the recent $25 Brent oil price drop lasts for a year, CFO Simon Henry said.
The company’s third quarter results did not reflect weak Brent prices because the company booked a realized oil price of $103.
However, Henry said falling global oil prices will be “squeezing revenues further as we look forward.”
The revenue dip could also impact Shell’s North American shale exploration plans.
While the company will continue moving forward with its current appraisal plans for its shale assets Henry said the projects “look less good at $80 a barrel than at $110.”
Despite the pressure falling oil prices are placing on exploration activities Shell will not cut capital expenditures based on short-term price fluctuations.
“We don’t invest according to the current oil price, we invest according to our expectations,” Henry said.
Shell CEO Ben van Beurden said the recent price volatility “underlines the importance of our drive to get a tighter grip on performance management, keep a tight hold on costs and spending, and improve the balance between growth and returns.”
Van Beurden said the company is moderating its spending on growth and accelerating its exit from non-strategic assets.
Shell’s divestment plan has brought in a total of $11.6 billion this year.
“We are now focusing on creating value from this slimmed-down position,” Van Beurden said.
Shell’s budget forecasts range call for prices of $70 per barrel to keep projects viable.