Oil price collapse triggers steep fall in earnings

Royal Dutch Shell cut its dividend for the first time since the second world war as the drop in oil prices triggered by the coronavirus pandemic nearly halved its quarterly earnings.
Net income adjusted for cost of supply — its preferred profit measure — dropped to $2.9bn in the three months to March 31. This compared with $5.3bn in the same period the previous year. Analysts had estimated $2.3bn.
Oil companies are in crisis mode as lower energy prices and a collapse in demand for fuels and chemicals puts intense pressure on their finances, with severe lockdowns and travel bans in place across much of the world.
The oil major, which will still be one of the FTSE 100’s biggest dividend payers, said it would reduce its quarterly payout to 16 cents per share, from 47 cents per share.
Shell was already under pressure before the coronavirus outbreak with weaker refining and chemical margins and challenging economic conditions forcing the Anglo-Dutch company to slow shareholder distributions. It also announced at the start of the year that it would be likely to miss its debt reduction targets.
Since then, Shell has said it would suspend its share buyback programme altogether and announced that capital expenditure would fall to $20bn or less this year, from initial plans for $25bn, in response to the pandemic. It said its operating costs would also decline by $3bn to $4bn.
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