Royal Dutch Shell slides into paper loss

Royal Dutch Shell slumped to a third quarter loss of $6.1bn (£4bn), with earnings well short of forecasts, due to write-offs and lower oil and gas prices, though cash flow remained relatively robust with a decline of 13%.

The quarterly loss compared badly with an $8.1bn profit in the first half of the year and the $5.3bn profit for the same quarter in 2014, with a $1bn hit from foreign exchange rates and financing items not helping matters.

Adjusted profits of $1.77bn fell 70% compared to the same period last year and were well short of estimates for $2.92bn.

Total writedowns amounted to $7.89bn, compared with charges of $581m in the same period last year, chiefly coming from decisions to halt longer-term projects and the retreating oil price.

Upstream charges included $4.62bn related to impairments, redundancy and restructuring, and other items such as contract provisions and well write-offs associated with management’s decision to halt drilling in Alaska for the foreseeable future as well as the freezing of the Carmon Creek project announced on Tuesday night, plus $3.69bn of impairment triggered by oil and gas prices.

Shell said downstream results improved thanks to higher realised refining margins and the "steps taken to improve to financial performance", while upstream earnings hit by lower hydrocarbon prices, that were only partly offset by lower costs, increased production volumes and improved operational performance.

The oil giant put its third quarter dividend at $0.47 per ordinary share and $0.94 per American Depositary Share. Chief executive Ben van Beurden stressed that the balance sheet gearing remained at similar levels to year ago levels, despite the halving of oil prices, with net investments and dividends both covered by operating cash flow over the last year.

“While our cash flow and our operating performance in the quarter were strong, the headline numbers we’re reporting today include substantial charges. These charges reflect both a lower oil and gas price outlook and the firm steps we are taking to review and reduce Shell’s longer-term option set."

"We have halted exploration activities offshore Alaska, and stopped the construction of the Carmon Creek in-situ oil project in Canada. These are difficult, but impactful decisions. I am determined that Shell will become a more focused and competitive company as a result."

He added that the acquisition of BG remains "on track for completion in early 2016".

Shares in Shell were down 2% to 1,703p after 15 minutes of trading on Thursday.