Shell warned on Thursdaythat further jobs and investment are at risk in the North Sea as it slashed annual global spending by a further $2bn (£1.3bn) and reported a 56% slump in first-quarter profits.
The Anglo-Dutch oil group also said there would be no slowdown in its controversial plans to start drilling in the Alaskan Arctic this summer where it hopes to discover large-scale oil reserves alongside evidence of gas found in the past.
Shell accepted the Guardian’s Keep it in the Ground Campaign had raised the profile of climate change but said it believed divestment from fossil fuel companies could be counter-productive.
Simon Henry, the chief financial officer, said the planned takeover of rival BG could be a “springboard” for further cutbacks, adding that Shell “is not necessarily a natural owner of assets in the North Sea but there are other companies who may well have more expertise” given the age of those energy fields.
Shell cut 250 jobs from its UK offshore base at Aberdeen last summer and signalled others could go as the oil company announced a further reduction in its overall global spending from $35bn to around $33bn this year.
Henry said positive North Sea tax changes by the government and the establishment of a new Oil and Gas Authority had only gone so far. “[Ministers] have to move quickly to make it attractive – at the moment its not.”
Hit by a massive fall in oil prices since last summer, Shell’s first-quarter earnings, excluding one-time items, fell from $7.33bn to $3.25bn.
Profits for the first three months of 2015 at Shell’s exploration and production arm plunged from $5.7bn a year to $675m. However, profits from downstream operations - which include refining and other non-production businesses - rose from $1.58bn to $2.65bn . That increase helped group earnings exceed analysts’ average forecast of $2.42bn.
Shell’s key international rival, Exxon Mobil, also unveiled a big downturn. Its first quarter earnings slumped46% slump to just under $5bn. That was also ahead of Wall Street expectations, because refining margins benefited from lower input costs - but they were still the weakest figures since 2009.
A second US oil group, ConocoPhillips, performed even worse plunging to a $222m underlying loss.
Exxon chief executive, Rex Tillerson, told an industry conference last week that low oil prices are “going to be with us for a while.”
Shell’s chief executive Ben van Beurden said: “Our results reflect the strength of our integrated business activities against a backdrop of lower oil prices. In what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell.
The Shell boss said the business had sold assets worth more than $2bn so far this year “as we successfully reduced our onshore footprint in Nigeria.”
He said Shell was cutting costs and capital spending; and expected to make further savings by “deferring and reshaping new projects.”
The items excluded from Shell’s earnings included a gain of $1.4bn from selling operations and a credit of $600m resulting from tax cuts on North Sea operations announced in the budget.
BP’s first-quarter results beat City forecasts on Tuesday due to strong downstream business and because it accounted for the full expected benefit of the North Sea tax cuts. Like Shell, BP’s exploration and production business suffered a profit slump caused by the collapse in the oil price.
Shell said it would be slowing investment in US shale, Canadian oil sands and Iraq to conserve cash but was determined to press ahead with its plans to take a 25-vessel “armada” to drill in the Chukchi Sea off Alaska in the coming months.
Henry said climate change was a “very serious issue” and had noted the divestment push in the Guardian’s Keep it in the Ground campaign. It was up to shareholders whether they bought or sold Shell stock, he said.
There was a danger that new investors, he argued, may be less interested in a” grown up dialogue” about global warming. “I’m not sure it’s an improvement in transparency or corporate governance or a proper discussion around the impact of climate change.”
