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Shell shares fall on spending cut

Thursday, January 29, 2015 - 01:46

Royal Dutch Shell shares have taken a hit after the oil company missed profit expectations and announced a three-year, $15 billion cut in spending. As Katie Gregory reports it reflects the steep fall in oil prices which are now near a six year low.

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The fall in oil price, forces the hand of yet another petrol giant. Royal Dutch Shell will cut $15 billion in spending over three years - after failing to meet fourth-quarter profit forecasts. Shares in the company immediately took a tumble on the news - dropping by as much as 4%. IG's Chris Beauchamp says the market wasn't really ready. (SOUNDBITE) (English) IG, SENIOR MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "I think maybe the company wasn't quite clear enough in its hints to analysts in the last few weeks about these results to warn that there would be difficulties on the way, but that is the main issue here." Shell's profits last year are still up on 2013 - and the company is saying it will resume oil drilling in the Arctic this year. CEO Ben Van Beurden knows it's controversial and expensive - oil prices will need to rise. (SOUNDBITE) (English) SHELL, CHIEF EXECUTIVE, BEN VAN BEURDEN, SAYING: "Think five years out, we will have to invest, as an industry, half a trillion dollars in making sure supply meets demand. That half a trillion dollars is not going to come at $50 dollar oil prices...it's just not viable. So we will need higher oil prices." It's the first of the major oil companies to report its Q4 earnings, and it is expected others will fall into the same path. Shells' main rivals - BP and Total are already making large cutbacks in capital expenditure. (SOUNDBITE) (English) IG, SENIOR MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "This is going to be the tone of updates in the months to come. that you just have continuing pullback from the expectations we had just a few months ago as companies learn to adjust to these much lower oil prices." By cutting spending, Shell is hoping to ensure stable returns to investors - something the Dutch company prides itself on. And it will do almost anything to protect that - It's CEO warning to expect more cuts - if crude prices remain low.

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Shell shares fall on spending cut

Thursday, January 29, 2015 - 01:46