Shell’s Segments in 1Q16: Upstream Reports a Loss
Shell’s 1Q16 Results: Downstream, Integrated Gas Saves the Day
Shell’s Segments
Before beginning with Royal Dutch Shell’s (RDS.A) segmental review, it is important to note that Shell’s previous quarters’ segments and numbers are restated. This is due to the change in segmental reporting and the definition of “identified items” by Shell, effective for 2016.
Shell’s Upstream segment earnings, which stood at -$195 million in 1Q15, slipped further to about -$1.4 billion in 1Q16, excluding the identified items discussed in the first part of this series.
This is on the back of falling crude oil and natural gas prices, partly offset by lower operating and exploration costs, as well as higher liquids production volumes. Brent prices, which averaged $54 per barrel in 1Q15, slipped down to $34 per barrel in 1Q16.
Shell’s Integrated Gas and Downstream Segments’ earnings in 1Q16
Shell’s Integrated Gas segment reported a fall in earnings by 33% over 1Q15 to $994 million in 1Q16. This is due to lower LNG prices and the Malaysia LNG Dua JVA expiry, which was partly offset by higher volumes due to the contribution from BG. Plus, Shell’s Downstream segment’s earnings fell by 24% over 1Q15 to $2 billion in 1Q16 due to a weaker refining environment.
Although earnings from Integrated Gas and Downstream segments fell, they contributed a major portion of Shell’s 1Q16 earnings.
Shell’s peers
Shell’s peers have also seen their segment dynamics change. The Upstream segment of Total (TOT), which contributed 48% of its total adjusted earnings in 1Q15, contributed 26% in 1Q16. Plus, Suncor Energy (SU) and BP Plc (BP) reported losses in their Upstream segments in 1Q16.
Also, ExxonMobil’s (XOM) Upstream segment, which contributed 58% of the total earnings in 1Q15, turned into a loss-making segment in 1Q16.
If you’re looking for exposure to energy sector stocks, you can consider the Energy Select Sector SPDR ETF (XLE). This ETF has XOM and CVX in its portfolio.
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