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LONDON (Alliance News) - Royal Dutch Shell highlighted the scale of the contraction facing the oil and gas industry Thursday when it said it would cut spending by a further USD15 billion over the next three years in response to the oil price decline, and could cut further if the weak conditions persist.

Oil is becoming more difficult and more costly to extract, and Shell's move is an admission that many planned new projects will be uneconomical at current oil prices, particularly outside North America.

The Anglo-Dutch company, the first of the world's oil majors to report 2014 results, reported higher earnings for the fourth quarter and whole of 2014, as its cost cutting drive helped offset a decline in production and revenue, but its results still missed analysts' expectations.

Announcing the further cut to spending, Chief Executive Ben van Beurden said Shell could yet cut spending by more, but the company was not going to over-react to the oil price falls and threaten its growth prospects by cutting spending by too much at this stage.

Shell reported closely-watched current-cost-of-supply earnings of USD4.16 billion for the three months to end-December, up 93% from USD2.2 billion a year earlier, bringing the figure for 2014 as a whole to USD19.04 billion, up from USD16.74 billion in 2013.

In 2014, Shell spent a total of USD37.3 billion in capital investment, and said the figure will drop in 2015.

Shell is the worst-performing stock in the FTSE 100 midday Thursday, with BP also down as analysts expect the other UK oil major to follow Shell's lead when it puts out its 2014 results on February 3.

Chevron Corp, ExxonMobil Corp and Total SA are the world's other oil majors, and so far France's Total has signalled a cut in spending this year.

FTSE 250-listed SOCO International became the latest of the mid-sized players to cut production and spending forecasts for 2015 due to the oil price decline, saying it expects output to be between 10,500 and 12,000 barrels of oil equivalent per day, down from 13,600 barrels in 2014. SOCO's capital expenditure is set to drop to about USD90 million, from USD161 million in 2014.

Alcoholic drinks giant Diageo is amongst the best performers on the day in the FTSE 100 after it said sales improved in its second quarter but were down for the first half as a whole, hit by slower demand in markets such as the US and China, which remained a drag on profit.

The maker of Johnnie Walker Scotch whisky and Captain Morgan rum, among many other drinks brands, reported a pretax profit of GBP1.64 billion for the six months to end-December, lower than the GBP2.13 billion profit it reported last year. Organic net sales were down 0.1% in the half as a whole, compared with 2% growth a year earlier, but they grew by 0.7% in the second quarter.

Chief Financial Officer Deirdre Mahlan told journalists that Diageo was not yet feeling the benefit of an improving economic picture in the US, as hoped, but the company's improved performance in the second quarter was down to company moves to improve underperforming brands and markets.
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Markets: London stocks are broadly lower, as further weakness in crude oil and commodity prices and the US Federal Reserve's decision to leave interest rates unchanged and remain "patient" reignited concerns about economic growth.

US stocks are set for a flat to higher open, with stock futures indicating the DJIA will open up 0.3%, the S&P 500 up 0.2% and the Nasdaq 100 flat.

FTSE 100: down 0.2% at 6,814.56
FTSE 250: down 0.4% at 16,353.27
AIM ALL-SHARE: down 0.4% at 687.68
GBP-USD: flat at 1.5141
EUR-USD: up at USD1.1317
GOLD: down at USD1,270.30 an ounce
OIL (Brent): up at USD48.87 a barrel
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Other Top Corporate News
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The London Stock Exchange Group is planning to put Russell Investments up for sale next month and hopes to raise around USD1.4 billion from the deal, Reuters reported. Citing two sources, Reuters said the exchange operator has hired Barclays to sell the business, which it acquired as part of the USD2.7 billion acquisition of Frank Russell Company last year, a deal done to allow LSE to get its hands on the company's large index business.
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Royal Mail said it has started looking for a new chairman because Donald Brydon has told its board he will step down later this year after six years in the role. The postal operator said Brydon will continue to chair the board until at least its annual general meeting in the summer.
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National Grid said it has started a share buyback programme as part of its management of the dilution that resulted from the take-up of its scrip dividend. The grid operator didn't say how many shares it will buy back, but said the programme will run between January 29 and March 4 at the latest.
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3i Group said its diluted net asset value per share rose 5% in the third quarter of its financial year, cash proceeds from realisations were bigger than the new investments it made, and it said it was remaining cautious on new investments because pricing remains full, particularly in Europe. The private equity investor reported a diluted net asset value per share of 375 pence as of December 31, before the payment of its interim dividend of 6.0 pence a share.
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Virgin Media has launched an attempt to halt the Premier League's auction of live football broadcast rights by asking UK media and communications regulator Ofcom to use emergency powers to protect consumers, The Daily Telegraph reported. Virgin has complained the way the auction is set up will mean football fans are likely to face higher bills for watching live matches, the Telegraph said. The move casts a degree of uncertainty over the auction, which is expected to see BT Group and Sky face off to win the live broadcast rights. Discovery Communications Inc, the owner of Eurosport, also is expected to take part in the auction.
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Home Retail Group said that its general merchandise business Argos has teamed up with supermarket chain J Sainsbury to open 10 new Argos digital stores inside existing Sainsbury’s supermarkets. The group said the 10 new format digital stores will open by summer this year, and will offer over 20,000 non-grocery products in-store, with an extended range of around 40,000 products which can be ordered in store for home delivery. Home Retail said the move will bring "extra choice and convenience" to Sainsbury's and Argos' customers who will have access to the combined ranges in the convenience of a Sainsbury's supermarket.
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Euromoney Institutional Investor said revenue fell 4% in its first quarter, hampered by pressures on the investment banking sector and weak commodity prices, offsetting an improving performance in the asset management sector. At constant currency, revenue was down 5%, and the company said that whilst currency movements did not "materially" hit its first quarter results, the strength of the US dollar against sterling is expected to have a more "significant" hit to its second quarter.
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Lonmin, the world's third largest platinum producer, said total refined platinum production for the first quarter of its financial year was impacted by the smelter shutdowns and was down 29% to 139,823 ounces when compared against the prior year period. Total platinum group metals produced in the three months to December 31 was 265,128 ounces, a decrease of 31% on the prior year period. Platinum sales for the quarter at 146,890 ounces were up 9.0%, or 12,086 ounces, on the prior year period. Platinum Group Metal sales were up 12% to 274,425 ounces.
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Polymetal International said production and sales rose year-on-year in the fourth quarter and for 2014 as a whole, but full-year revenue slightly decreased due to weaker commodity prices. In the three months ended December 31, the company produced 391,000 ounces of gold equivalent, a 26% rise from a year earlier, whilst gold production rose by 41% to 299,000 ounces from 212,000 ounces. Silver production fell by 3% to 5.5 million ounces from 5.7 million ounces.
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Mecca bingo operator Rank Group said revenue and profit rose in the first half of the year, driven by casino acquisitions by its Grosvenor Casinos business, while profit improved at its Mecca business thanks to cost savings and the reduction in bingo duty. The company, which operates the Mecca bingo chain as well as Grosvenor Casinos, posted a pretax profit before exceptional items of GBP34.9 million, up from GBP28.3 million the year before, as revenue rose 3% to GBP361.7 million, up from GBP352.4 million. The group declared a 19% increase in its interim dividend to 1.60 pence per share.
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RPC Group said revenue in its financial third quarter ticked up year-on-year on the back of acquisitions and slightly higher underlying activity levels. Adjusted operating profit was in line with its expectations and significantly higher year-on-year on the back of organic growth and acquisitions. Performance was helped by the time lag in passing through falling polymer prices to its customer base, which was offset to some extent by the strength of sterling against the euro. RPC said it expects both trends to continue in the final quarter of its financial year to the end of March.
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Mitchells & Butlers said it saw a good performance over the festive trading period, though it warned its margins remain under pressure owing to the integration of the Orchid business and pricing pressures. The FTSE 250-listed pubs company said sales in the 17 weeks to January 27 have increased by 9.1% year on year, with like-for-like sales rising 1.7%. The company said its trading performance over the festive period, the two weeks over Christmas and New Year, was strong, with like-for-like annual sales growth of 4.8%. Like-for-like sales on Christmas Day rose 7.1%, it added.
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AIM Movers
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Fitbug Holdings shares are up by more than half after it announced that its Kiqplan digital health coaching platform will launch on the new Jawbone Marketplace. Aukett Swanke Group is doing well after it reported robust growth in both profit and revenue in its last financial year, driven almost solely by its UK business. Red Emperor Resources has lost a quarter of its value after it said it is shutting down its Puntland joint venture in Somalia. The decision follows negotiations held between the Somalian government and states in the country, including Puntland, over revisions to the country's hydrocarbon laws, particularly as regards revenue-sharing legislation.
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Top Economics And General
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The US Federal Reserve sees the US economy growing "at a solid pace" but remains "patient" on monetary policy, leaving its unprecedented near-zero interest rate unchanged after this week's meeting. The central bank said there was no sign of higher inflation even after six years of unprecedented lax monetary policy. The statement explicitly added "international developments" to the "wide range" of factors and data being taken into account for evaluating interest rate policy, amid continuing turmoil in the eurozone, China's slowing economy and lingering geopolitical risks in Ukraine and the Middle East.
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US crude oil plunged to end below the USD45-a-barrel mark on Wednesday, after an official weekly oil report from the Energy Information Administration showed crude oil stockpiles in the US to have surged more than expected last week, with inventories at an 80-year high. Earlier on Wednesday, a weekly report from the US Energy Information Administration showed US crude oil inventories to have jumped 8.9 million barrels in the week ended January 23, while analysts expected an increase of 3.5 million barrels.
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The head of the European Parliament, Martin Schulz, is to hold talks with Greece's new government on Thursday amid an escalating dispute with the country's international creditors. Schulz is the first senior member of the EU to travel to Athens and meet with Prime Minister Alexis Tsipras since Sunday's parliamentary elections. The head of the eurozone, Jeroen Dijsselbloem, also is scheduled to visit Athens on Friday for talks with the new SYRIZA-led government. Schulz's visit comes one day after Tsipras announced a radical overhaul of the country's austerity programme, vowing to cancel dozens of privatisation deals agreed with creditors under the former conservative government.
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Bank of England Governor Mark Carney called for the creation of true fiscal union as part of monetary union in the euro area. In a speech in Dublin, honouring former Canadian Finance Minister Jim Flaherty, Carney praised the monetary boldness of the European Central Bank. The actions were timely and welcome. But it does not end with the monetary policy boldness, he said. The ECB alone cannot eliminate the risks of a prolonged stagnation. Carney noted that these exist primarily because the current construction of the euro area is unfinished. "Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt trap," Carney said.
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In the UK, Carney said inflation is likely to fall further over the coming months and turn slightly negative for a period, he said. But it should pick up again in twelve months or so as the direct effects of a lower energy price drop out of the inflation rate.
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UK house prices continued to increase at a faster rate in December, data published by the Land Registry showed. House prices rose 0.6% month-on-month in December after rising 0.1% in November. On a yearly basis, house prices increased 7% in December, slightly slower than the 7.2% rise seen in the prior month. As a result, average house prices in England and Wales reached GBP 177,766 in December compared to a peak of GBP 181,383 seen in November 2007.
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Germany's unemployment rate declined to a record low in January, the Federal Labor Agency reported. The jobless rate dropped to a seasonally adjusted 6.5% from a revised 6.6% in December. The rate came in line with expectations. The number of people out of work decreased by 9,000 in January, while economists forecast a decline of 10,000.
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Eurozone economic confidence rose to a six-month high in January, survey data from the European Commission showed. The economic confidence index came in at 101.2, the highest since July, from 100.6 in December. It was forecast to rise to 101.6. The consumer confidence index rose to -8.5 from -10.9 a month ago. The score came in line with flash estimate. The marked rise in consumer confidence was fueled by upward revisions of all the four components of the indicator.
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Jordan has until sunset on Thursday to release a jailed female militant, or a Japanese journalist and Jordanian fighter pilot will be executed by the Islamic State jihadist group, according to a new audio recording. In the recording, a man believed to be Japanese journalist Kenji Goto says the deadline has again been extended and demands the release of Sajida al-Rishawi, a radical Islamist who was part of a 2005 series of bombings in Jordan that killed dozens.
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The Israel-Lebanon border remained tense amid international efforts to avoid an escalation following the worst exchange of fire between Israeli soldiers and the Iran-backed Hezbollah militia since the 2006 war. Two Israeli soldiers and a Spanish UN peacekeeper were killed Wednesday. The violence started when Hezbollah launched anti-tank missiles at an Israeli convoy driving along the border near the village of Ghajar, on the Israeli-controlled side of the Golan Heights. Two Israeli military vehicles were hit directly, killing a company commander with the rank of captain and a sergeant. Seven soldiers were also wounded.
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Afternoon Watchlist (all times in GMT)

13:00 Germany Consumer Price Index
13:30 US Jobless Claims
15:00 US Pending Home Sales
15:30 US EIA Natural Gas Storage change
23:30 Japan National Consumer Price Index
23:30 Japan Overall Household Spending
23:30 Japan Unemployment Rate
23:50 Japan Industrial Production
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Friday's Key UK Corporate Events

Fuller,Smith & Turner - Trading Update
BT Group - Q3 Results
Vedanta Resources - Q3 Production Results
James Halstead - Trading Statement
KCOM Group - Trading Statement
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Friday's Key Economic Events (all times in GMT)

00:05 UK Gfk Consumer Confidence
04:00 Japan Vehicle Production
05:00 Japan Housing Starts
05:00 Japan Construction Orders
07:00 Germany Retail Sales
07:45 France Consumer Spending
07:45 France Producer Prices
09:00 Italy Unemployment
09:30 UK Consumer Credit/Mortgage Approvals
10:00 EU Consumer Price Index
10:00 Italy Producer Price Index
10:00 EU Unemployment Rate
13:30 US Employment cost index
13:30 US Gross Domestic Product
14:45 US Chicago Purchasing Managers' Index
15:00 US Reuters/Michigan Consumer Sentiment Index
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