Shell Q2 profits slump on weaker oil, gas prices

Shell reported its worst results since 2016 after a 26% slump in adjusted second quarter profits due to weaker oil and gas prices .

The oil giant said net income attributable to shareholders in the period on a current cost of supplies basis $3.6bn (£2.9bn), compared with $5.4bn a year ago as the company maintained 2020 guidance. Total income fell 50% to $3bn.

It added that results were also hit by “challenging macroeconomic conditions” with lower realised chemicals and refining margins as well as higher provisions, partly offset by improved production.

Oil and gas production was up 4% from a year earlier to 3.58m barrels of oil equivalent per day (Iboed), but was down from 3.442m in the first quarter of 2019.

Cash flow rose 16% to $11bn. Chief executive Ben van Beurden said the start-up of the Gulf of Mexico Appomattox project and the first LNG cargo from the Australian Prelude floating facility would generate extra cash in the coming quarters.

“The resilience of our upstream and customer-facing businesses and their ability to generate cash support the delivery of our 2020 outlook, which remains unchanged,” he said.

"We have delivered good cash flow performance, despite earnings volatility, in a quarter that has seen challenging macroeconomic conditions in refining and chemicals as well as lower gas prices."

Shell said integrated gas production was expected to be at a similar level as in the third quarter 2018. LNG liquefaction volumes were expected to increase slightly, mainly due to project ramp-ups.

Upstream production was expected to be up by around 50,000 – 100,000 boed in the third quarter, mainly due to field ramp-ups and the transfer of the firm's Salym asset from the integrated gas segment, partly offset by field decline and divestments.

Refinery availability was expected to be at a similar level as in the third quarter 2018. Oil products sales volumes were expected to fall by around 40,000 – 70,000 boed compared with the same period a year ago, mainly as a result of divestment in Argentina.