Shell and Statoil Delivered ‘Solid’ Performances in 1Q 2015

Shell and Statoil both delivered a solid performance during the first quarter of 2015 in the context of lower energy prices, results from the firms revealed Thursday. The results continued a trend begun by European majors BP, Total and Eni earlier in the week that showed downstream activities offsetting a decline in revenues and earnings in upstream.

Taking into account the decline in oil and gas prices, Shell produced robust results overall, although its upstream business segment was severely affected. The firm’s adjusted first-quarter earnings came in at $3.2 billion, compared with $7.3 billion during 1Q 2014.

Shell’s upstream contribution saw its CCS (current cost of supplies) earnings crash to $675 million during 1Q 2015 compared with $5.7 billion in 1Q 2014. But the firm’s downstream segment enjoyed a 68-percent increase in first-quarter CCS earnings to $2.6 billion.

Production during the quarter was 3.16 million barrels of oil equivalent per day compared with 3.25 million boepd during 1Q 2014.

«Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices. Meanwhile, 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,» Shell CEO Ben van Beurden commented in a company statement.

Van Beurden added that he saw the proposed takeover of BG Group making for a stronger company, accelerating Shell’s growth strategy in deep water and LNG as well as creating «a springboard for further optimization of our asset base».

Oil and gas industry analysts at investment bank Jefferies commented that Shell’s upstream results were «light», having missed both the consensus analyst forecast of $777 million and Jefferies’ own forecast of $1.1 billion. However, Jefferies also highlighted that Shell’s cash generation was «strong, given the oil price», with the firm generating $7.1 billion of operating cash flow in 1Q 2015.

Statoil reported Thursday a 28-percent fall in its first-quarter revenues. The Norwegian major’s revenue for 1Q 2015 was NOK 121.5 billion ($15.8 billion), compared to NOK 169.6 billion ($22 billion). The firm’s adjusted earnings for the quarter came in 45-percent lower at NOK 19 billion ($2.5 billion) – mainly as a result of the significant drop in the price of oil, lower European gas prices and increased depreciation and operating costs.

Statoil said that its successes in exploration during the first quarter – including discoveries in Tanzania, the Gulf of Mexico and Norway – «underline Statoil’s position as a global top explorer».

Meanwhile, the firm’s equity production during the first quarter of this year was 2.06 million boepd, compared to 1.98 million boepd during 1Q 2014.

Statoil CEO Eldar Sætre said that the firm was taking «a more cautious view due to the uncertainty in the commodity markets». This is reflected by Statoil choosing to optimize the development of some of its fields, such as it decision to spend more time maturing the Johan Castberg and Snorre 2040 licenses.

Commenting on Statoil’s results, Jefferies said that they appear to be a «robust… in the context of quite low expectations» but cautioned that «while management is clearly responding to a lower near-term oil price outlook, Statoil still has one of the most-challenged organic cash cycles amongst peers».

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