Don’t panic

29 January 2015 By Fiona Maharg-Bravo

The Anglo-Dutch major, which met its 2014 targets, doesn’t want to overreact to the oil price rout. It has cut three-year capex plans by a modest 14 percent and is maintaining the dividend. Shell has a strong balance sheet, but even it will need a sharper axe if oil stays low.

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Royal Dutch Shell said it would cut capital expenditure by $15 billion over the next three years in response to the sharp decline in oil prices. The Anglo-Dutch major reported net profit of $3.3 billion in the fourth quarter of 2014, excluding inventory charges and one-offs, up from $2.9 billion a year ago but below market expectations.

The miss was driven by a fall in upstream earnings to $1.73 billion, a 30 percent fall from the same period a year earlier due in part to lower oil prices. This was partially offset by a near tripling of earnings from the downstream division to $1.55 billion.

Shell said capital expenditure would be lower this year than in 2014 without giving a specific number and pledged to maintain the dividend in the first quarter.

In a statement, Chief Executive Ben van Beurden said: “We are stepping up our drive for stronger capital efficiency, whilst being careful not to over-react to the recent fall in oil prices.”

At 1200 GMT, Shell shares were down 4 percent to 2,064 pence.

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