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Shell returns to profit amid cost-cutting but boss warns over low oil prices

Published 01/11/2016

Shell said profits came in at 1.4 billion US dollars (£1.1 billion) compared with a 6.1 billion US dollar (£5 billion) loss in the same period last year
Shell said profits came in at 1.4 billion US dollars (£1.1 billion) compared with a 6.1 billion US dollar (£5 billion) loss in the same period last year

Royal Dutch Shell swung into profit in the third quarter as a cost-cutting and divestment programme began to bear fruit.

The oil giant said profits came in at 1.4 billion US dollars (£1.1 billion) compared with a 6.1 billion US dollar (£5 billion) loss in the same period last year as the company also reaped the benefits of its acquisition of BG Group.

Adjusted profit, which strips out exceptional items, also rose from 2.4 billion US dollars (£2 billion) to 2.8 billion US dollars (£2.3 billion) in the period.

However, chief executive Ben van Beurden warned that the outlook for the industry, which continues to be hit by low oil and gas prices, remains uncertain.

"Shell delivered better results this quarter, reflecting strong operational and cost performance. But lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain," he said.

"The integration of Shell and BG is now essentially done and has been completed well ahead of plan. It's been an important catalyst for the significant and lasting changes we are making to the company's working practices, cost structure and portfolio."

Shell, which completed a 50 billion US dollars (£38 billion) acquisition of BG Group earlier this year, is embarking on an ambitious cost-cutting drive and a 30 billion US dollars (£24.6 billion) divestment initiative.

The company said it is actively looking at 16 asset sales, after last week announcing that it will sell off some of its Canadian oil and gas assets for more than 1 billion US dollars (£815 million).

Shares in the firm rose 3.24% in morning trading as investors welcomed the results.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "Despite the respite provided by an improved oil price, conditions remain tough in the oil and gas sector. Nonetheless, the return to profit in the upstream division today is symbolically important as the group heaves itself out of the well it found itself in after the oil price collapsed.

"Unless the oil price stages a miraculous recovery, there's a long way to go before Shell returns to rude health; nonetheless the group is making progress in climbing the oil pole."

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