Shell, Statoil report losses as oil price drags

Oil giants Shell and Statoil reported steep declines in earnings as lower crude prices continue to inflict pain on major oil companies.

Shell's fourth-quarter 2015 earnings, on a current cost of supplies (CCS) basis, were $1.8 billion compared with $4.2 billion for the same quarter a year ago, a decline of 56 percent.

The oil giant's exploration and production side recorded fourth-quarter earnings "impacted by the significant decline in oil and gas prices, partly offset by lower costs."

On an annual basis, Shell posted the lowest income in 13 years in 2015, according to Reuters, with income falling 87 percent from the previous year to $1.94 billion.

Shell's chief executive, Ben van Beurden, said the company expected to make further reductions to capital spending in 2016 and staff reductions in both Shell and BG Group, the natural gas company Shell is taking over following shareholder approval last week.

"We are making substantial changes in the company, reorganizing our Upstream (exploration and production), and reducing costs and capital investment, as we refocus Shell, and respond to lower oil prices. As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies," he said in an earnings statement.

The bad news was not confined to Shell alone. Earlier on Thursday, Norwegian petroleum company Statoil also reported a cut in capital spending as oil prices continue to drag on the major.

In the fourth quarter of 2015, Statoil posted adjusted earnings of 15.2 billion Norwegian crowns ($1.78 billion) but ahead of the 13.9 billion crowns expected by analysts polled by Reuters. Still, adjusted earnings were down from 26.9 billion crowns in the same period the year before, marking a 44 percent decline.

Although income was higher than expected, the group posted a net loss of 9.2 billion crowns in the fourth quarter, worse than the 8.9 billion crowns loss seen in the same period the year earlier. Analysts polled by Reuters had expected net profit of around 3.18 billion crowns .

The company said the loss was mainly as a result of lower short-term oil price assumptions leading to impairment charges and provisions.

The oil company said it planned to make further cuts to capital spending in 2016, from $14.7 billion in 2015 to around $13 billion in 2016.

The earnings come amid tough times for oil majors. After a brief rally in the new year on hopes that major oil producing nations could come to a deal to cut production, oil prices have fallen further. However, prices experienced a rally Wednesday on a lower dollar and renewed hopes of a production cut.

Times were tough enough for the oil giant in the previous quarter when oil was trading around $45 a barrel. Then, the company said it was cutting costs further as the falling oil price took its toll on performance. It reported then that third quarter adjusted operating profit almost halved compared to the same period the year before.

Statoil is one of many oil companies feeling the pinch of lower oil prices, which have resumed their slide to trade below $30 a barrel this week. Demand has failed to keep up with a glut in supply and many oil companies have cut exploration and production amid the slump.

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