Oil supermajor Shell has confirmed that it will look to cut its investment even further than originally planned, after profits get dragged down by upstream.
Giving a presentation on the company’s first quarter results Wednesday, CEO Ben van Beurden stated that Shell would now look to reduce the already planned cuts by a further 10%, from $33 billion to $30 billion.
Shell To Cut Investment 10% Further
The cuts come on the back of company’s profits nosediving to $800 million in the first three months of 2016, from $4.8 billion during the same period last year.
Ben van Beurden said: “Putting all of this together, capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36% lower than combined Shell and BG investment in 2014.”
“In practice, we expect to absorb BG’s capital investment and operating expenses during 2016, with no net increase overall, compared with Shell stand alone in 2015.”
Upstream Vs Downstream
As with rival BP, Shell’s strongest performance lies in its Downstream refining business.
Although falling $600 million dollars, Shell’s downstream business still produced a profit of $2.6 billion for the period, against a loss of $1.4 billion in upstream.
Ben van Beurden concluded: “We will continue to manage spend, through dynamic decision-making across the organisation, taking advantage of opportunities from both the deflating market and the two companies coming together.”
“The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry. For Shell and our shareholders, this is a unique opportunity to reshape and simplify the company.”