Boston, MA 05/02/2014 (wallstreetpr) – The oil and gas industry is no longer the best place for players as opportunities dwindle on every turn. While there are still some profitable companies, many have registered profits decline and are worried about the future and Royal Dutch Shell plc (ADR) (NYSE:RDS.A) belongs to that category.
From the Americas to Europe and Asia, oil and gas companies are faced with challenges ranging from overcapacity, high production costs and soft commodity prices. All these continue to impact revenue and profits. So far, giant oil companies based in Europe have reported an impact on their profits in Q1. BP reported about 24 percent decline in Q1 profit and Norway’s Statoil ASA had a much better Q1, reporting about 32 percent increase in profit.
Asset divestment
Shell announced plans to sell assets worth $15 billion by end of 2015. The company has so far earmarked $4.5 billion worth of holdings for sale. The company is turning to assets divestment in efforts to achieve financial efficiency. Shell stated that its Q1 performance was impacted by assets write-off in Asia.
Q1 in numbers
The Europe’s largest oil company reported a profit of $7.3 billion, down 3 percent from a year earlier figure. That was better than $5 billion that analysts expected for the quarter. However, considering impairment charges, the company suffered about 44 percent decline in profit in Q1.
Revenue in the quarter was $109.66 billion, down from revenue of $112.81 billion in Q12013.
Another business is austerity
To meet the objectives of its mainstay business, Royal Dutch Shell plc (ADR) (NYSE:RDS.A) must first undertake the business of austerity. The company’s new CEO Ben van Beurden fired profit warning earlier this year, coming for the first time since 2004. He particularly warned about the challenging Americas operations. However, he was quick to say that all was not lost as the company could still look into its cost and expenses to protect profits even in tough economic environment.
As such, in addition to assets divestment, the company seeks to implement more aggressive cost and expenses control measures, all in efforts to create value for the shareholders.
