Shell CEO Ben Van Buerden says corporate strategies paying off with good results for the third quarter. Photo courtesy of Royal Dutch Shell.
THE HAGUE, Netherlands, Nov. 1 (UPI) -- After a string of misses, Royal Dutch Shell said Tuesday its operational costs were lower than costs from before it merged with BG Group two years ago.
Shell said its adjusted profits for the third quarter were around $2.8 billion, about 17 percent better than one year ago. The company said it plans to spend about $25 billion next year, about 13 percent less than this year.
"Our underlying operational costs in 2016 are already at an annualized run rate of $40 billion, $9 billion lower than Shell and BG costs in 2014," CEO Ben Van Buerden said in a statement. "They're set to reduce further on a like-for-like basis as deal synergies and improvements are delivered in full."
Shell, moving through the year after a merger with British energy company BG Group, said net income during the second quarter fell more than 70 percent to $1.18 billion. The company attributed that decline in part to some of the fiscal pressures from its $7 billion tie-up with BG Group, weak industry conditions and tougher tax regimes.
The company already left oil and gas operations in up to 10 countries, focusing more heavily on gas-rich Australia and shale opportunities in the United States. Van Buerden said the changes post-merger would be "significant and lasting" and as recently as late October, the company shed some of its assets in Canada for about $1 billion.
The CEO said results for the third quarter were a result of lower operating expenses and the benefits from the production volumes that came from the assets BG Group brought to the table following the successful merger.
Total production was around 3.6 billion barrels of oil equivalent per day, a 25 percent increase from third quarter 2015. Looking ahead, Van Buerden said new projects should add more to output and advance cash flow for the Dutch supermajor.
"Cash flow from new projects started up between 2014 and 2018 is expected to total $10 billion in 2018, at an average $60 oil price," he said.
Brent crude oil was trading at around $49 per barrel early Tuesday.