Royal Dutch Shell has reported better-than-expected earnings for the first quarter as the performance of its refining and integrated gas businesses helped compensate for the oil price slump.
Profit adjusted for changes in the value of inventories and excluding one-time items dropped to $1.55 billion from $3.74 billion one year ago but beat analysts’ estimates of $1.04 billion. The refining and integrated gas divisions posted profits but the critical oil and gas production unit lost $1.4 billion.
The earnings update was the first since Shell completed its $54 billion acquisition of BG Group, a U.K.-based oil and gas producer, in a bet on the fast-growing liquefied natural gas industry.
“The completion of the BG deal has reinforced our strategy and strength against the backdrop of hugely challenging times for our industry,” Shell CEO Ben van Beurden said in a news release.
CFO Simon Henry said in the company’s earnings call that BG contributed about $200 million in earnings in the quarter. Shell also said its annual operating expenses will fall to $40 billion this year, despite the BG acquisition, from $53 billion in 2014.
As Reuters reports, “Europe’s largest oil company has been under pressure from shareholders to cut annual spending below $30 billion to ensure it can maintain its dividend given the slow recovery in oil prices.”
Analysts welcomed Shell’s spending cuts, Reuters said, though some investors are still hoping for deeper cuts when it announces its strategic outlook next month.
The company warned, however, that low oil and gas prices, significant maintenance at production sites as well as “substantial redundancy and restructuring charges” will impact second-quarter earnings.