Royal Dutch Shell reported an 89 percent drop in net income on Wednesday as low oil prices sunk Upstream earnings to a $1.4 billion loss.
The company posted a first quarter net income attributable to shareholders of $484 million, down from $4.43 billion in the same quarter of last year.
Current cost of supplies (CCS) earnings attributable to shareholders fell 83 percent year-over-year to $814 million in the first quarter.
First quarter CCS earnings attributable to shareholders excluding identified items were $1.55 billion compared with $3.73 billion for the first quarter 2015, or a 58 percent year-over-year decrease.
Identified items came in at a loss of $739 million compared to $1.02 billion in the year ago quarter.
First quarter basic CCS earnings per share excluding identified items decreased to $0.22, a 63 percent decline from the first quarter 2015.
“Compared with the first quarter 2015, CCS earnings attributable to shareholders excluding identified items were impacted by the decline in oil, gas and LNG prices and weaker refining industry conditions. Earnings benefited from lower operating expenses, as steps taken by Shell to reduce costs more than offset the increase in operating expenses associated with BG,” Shell said.
Total revenue and income fell to $49.73 billion in the first quarter compared to $68.84 billion in the year ago quarter.
Integrated Gas earnings excluding identified items fell 33 percent year-over-year to $994 million.
Upstream earnings excluding identified items plummeted to a loss of $1.43 billion compared with a loss of $195 million a year ago.
Total Upstream production available for sale rose 11 percent year-over-year to 2.828 million barrels of oil equivalent per day.
First quarter Downstream earnings excluding identified items were $2.01 billion compared with $2.64 billion for the first quarter 2015.
Total expenditures fell to $50.37 billion in the first quarter, down from $63 billion in the first quarter of 2015.
Income before taxation came in at a loss of $642 million compared to $5.83 billion in income during the same quarter last year.
The company said it expects “substantial redundancy and restructuring charges, which will be included as identified items, in the second quarter 2016.”
Gearing at the end of the first quarter 2016 was up to 26.1 percent from 12.4 percent at the end of the first quarter of 2015.
“This increase mainly reflects the impact of the acquisition of BG,” Shell said.
Shell expects Integrated Gas earnings to be negatively impacted by a reduction of about 30,000 barrels of oil equivalent per day (boe/d) associated with the impact of maintenance in the second quarter compared to the year-ago quarter.
Upstream earnings are expected to be negatively impacted by a reduction of some 25,000 boe/d related to a Malaysia PSC expiry and about 10,000 boe/d as a result of divestments.
Upstream earnings are expected to be positively impacted by lower levels of curtailment and underground storage utilization at NAM in the Netherlands and maintenance of about 60,000 boe/d, Shell said.
“Given the significant decline in oil and gas prices in the first quarter 2016, second quarter earnings are expected to be negatively impacted by the price-lag effect in our LNG contracts,” Shell said.
A first quarter 2016 dividend has been announced of $0.47 per ordinary share and $0.94 per American Depositary Share.
“We will continue to manage spend, through dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together. The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry,” Shell CEO Ben van Beurden said.