Image courtesy of Shell/Flickr.

Royal Dutch Shell warned on Wednesday that full year earnings for 2015 may drop by nearly $9 billion from the previous year.

Shell expects full year 2015 earnings on a current cost of supplies (CCS) basis, excluding identified items, to be in the range of $10.4 billion to $10.7 billion, a sharp slide from $19 billion in full year earnings in 2014.

Shell had initially expected full year earnings to come in at about $10.8 billion, the BBC said.

The company expects its fourth quarter 2015 earnings on a CCS basis, excluding identified items, to be in the range of between $1.6 billion to $1.9 billion, down from $4.2 billion in the fourth quarter of 2014.

Upstream earnings are expected to account for $400 million to $500 million of fourth quarter earnings, while Integrated Gas is expected to account for about $1.6 billion to $1.9 billion.

The company’s downstream business will account for an estimated $1.4 billion to $1.6 billion of fourth quarter earnings, with earnings from oil products expected to be between $1.3 to $1.4 billion and earnings from chemicals coming in at an estimated $100 to $200 million.

Shell said identified items for the fourth quarter of 2015 are expected to be in the range of a net charge of $200 million to “an immaterial gain, mainly reflecting gains on sale of assets and impairments.”

Identified items for the full year of 2015 are expected to be a net charge of about $6.8 to $7.0 billion.

Income attributable to Royal Dutch Shell shareholders is expected to be between of $0.6 billion to $1.0 billion for the fourth quarter 2015 and between $1.6 to $2.0 billion for the full year 2015.

Cash flow from operating activities for the fourth quarter 2015 is expected to be between $4.8 to $6.0 billion and between $29.2 billion to $30.4 billion for the full year.

“I’m pleased with Shell’s operating performance in 2015, and the momentum in the company to reduce costs and to improve competitiveness,” Shell CEO Ben van Beurden said.

Production for the fourth quarter 2015 was 3 million barrels of oil equivalent per day and 2.9 boepd for the full year 2015.

Shell said it cut operating costs by about $4 billion, or about 10 percent, in 2015 and expects a further $3 billion reduction in operating costs in 2016.

Those operating cost cuts do not include synergies tied to Shell’s pending acquisition of BG Group.

Shell confirmed that it will reduce its headcount by about 10,000 staff and direct contractor positions in 2015 and 2016 across both companies, as “streamlining and integration of the two companies continue.”

Shell’s capital investment in 2015 is expected to be $29 billion, a 20 percent reduction from 2014 levels.

Capital investment in 2016 for Shell and BG combined is currently expected to be $33 billion, around a 45 percent reduction from combined spending that peaked in 2013.

“Flexibility for further reductions is available and will be utilised should conditions warrant that,” Shell added.

The company said asset sales for 2014 and 2015 now exceed $20 billion, well above its initial estimate of $15 billion set out in early 2014.

Shell added that “preparations are well advanced for $30 billion of asset sales in 2016-18, assuming the successful completion of the combination.”

Shell agreed in April to acquire UK-based BG Group for about $70 billion in cash and shares, when Brent crude prices were hovering around $62 per barrel.

Chinese antitrust regulators approved the combination in December, marking the end of the pre-conditional approval process.

Shell shareholders are scheduled to vote on the BG Group combination on January 27.

“The completion of the BG transaction, which we are expecting in a matter of weeks, will mark the start of a new chapter in Shell, to rejuvenate the company, and improve shareholder returns,” van Beurden added.

Shell’s fourth quarter and full year 2015 results and fourth quarter 2015 dividend are scheduled to be announced on February 4. 2016.


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