Shell reassures with less-than-feared profit slump in Q1

Royal Dutch Shell saw unadjusted profits sink in the first quarter on the back of depressed crude prices, though results were much better than analysts had feared.The Anglo-Dutch oil giant, set to take over BG Group in a £47bn deal, also trimmed its capital expenditure budget for this year.Current cost of supplies (CCS) earnings excluding so-called 'identified items' totalled just $3.25bn in the first three months of 2015, down 56% from $7.33bn the year before.However, this was much better than $2.5bn pencilled in by analysts with the downstream refining and trading division performing much better than expected.Earnings at the upstream division, which produced 2% less oil than last year at 3.17m barrels per day, were affected by the "significant decline in oil and gas prices and lower trading contributions", Shell said.The report was well-received by investors on Thursday, with shares up 0.5% at 2,062.5p by 15:36.Identified items amounted to a net gain of $1.52bn, mainly due to gains on divestments and a $600m credit to the statutory tax rate reduction in the UK, compared with net charge of $2.86bn for the company in the same period last year. Including these, CCS earnings actually improved by 7% year-on-year to $4.76bn in the first quarter."In what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell," said chief executive Ben van Beurden. He said that the tie-up with BG would create a "stronger company" for both sets of shareholders.Looking ahead, Shell also shaved its capital investment budget for 2015 by $2bn to "$33bn or less". "Shell continues to curtail capital investment, retaining attractive options for the medium term, whilst balancing affordability, growth and returns," the company said.Hargreaves Lansdown Stockbrokers analyst Keith Bowman praised the results, applauding Shell's "management initiatives" such as non-core asset sales, spending cuts and BG Group takeover amid a volatile environment for the oil industry.He said that the company's integrated business model was "again aiding performance". "Like rivals including BP, the fall in the oil price has proved to be something of a double edged sword, with the earnings impacted upstream operations being partly compensated for by the tailwind given to its downstream refining business," said equity analyst Keith Bowman.