Engineering news
Shell has reported a £4 billion ($6.1 billion) loss in its third quarter 2015 earnings — 70'% lower than the third quarter of 2014. The loss is a result of the company reorganising projects and ceasing further exploration activity in offshore Alaska for the foreseeable future to cope with the plunge in oil prices.
The third quarter 2015 earnings were $1.8 billon on a current cost of supplies (CCS) basis, compared with $5.8 billion for the third quarter of 2014. The net loss compares with a profit of $4.5 billion in the same period last year. The company also reported $7.9 billion in charges, including $2.6 billion for Alaska and $2 billion related to the decision to cancel the Carmon Creek project in Alberta, Canada.
Cash flow from operating activities for the third quarter 2015 was $11.2 billion, compared with $12.8 billion for the same quarter last year. Excluding working capital movements, cash flow from operating activities for the third quarter 2015 was $5.3 billion, compared with $11.1 billion for the third quarter 2014.
Energy producers such as Shell are cancelling or delaying projects as a crude price slump forces them to prioritise spending. The company abandoned drilling offshore Alaska indefinitely last month after it failed to find enough oil or gas in the Chukchi Sea. It also withdrew an application to develop the Pierre River oil-sands mine in northern Alberta.
Ben van Beurden, the company’s chief executive officer, said: “We are making changes to Shell’s portfolio mix by reviewing our longer-term upstream options worldwide, and managing affordability and exposure in the current world of lower oil prices. This is forcing tough choices at Shell.
“While our cash flow and our operating performance in the quarter were strong, the headline numbers we’re reporting today include substantial charges,” These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set. We have halted exploration activities offshore Alaska, and stopped the construction of the Carmon Creek in-situ oil project in Canada.
“These are difficult, but impactful decisions. I am determined that Shell will become a more focused and competitive company as a result.”