Shell Profit Tumbles 72% On Low Oil Prices

Shares (Berlin: DI6.BE - news) at Royal Dutch Shell (Xetra: A0ET6Q - news) fell 3.5% in early trading after the oil giant announced second-quarter profits fell more than 70% to $1.05bn (£800m).

Chief (Taiwan OTC: 3345.TWO - news) executive Ben van Beurden said: "Lower oil prices continue to be a significant challenge across the business.

"We are making significant and lasting changes to Shell (LSE: RDSB.L - news) 's working practices and cost structure."

The company posted lower income in its gas, petrochemical and oil refining segments as well as oil production.

Crude prices fell to a 12-year low in January, forcing energy companies worldwide to slash spending, cut jobs and sell assets as low oil prices weigh on profitability.

Rivals BP and Statoil (LSE: 0M2Z.L - news) also reported worse than expected second-quarter results this week, but French oil producer Total (LSE: 524773.L - news) fared better.

Shell's oil production for the second-quarter was lower than expected after output was affected by production losses in Canada and Nigeria.

It stood at 3.51 million barrels a day, below the predicted 3.63 million.

Profits have also been impacted from the higher charges resulting from the company's £35bn merger with BG group (EUREX: 1007667.EX - news) earlier this year.

However the oil giant is expecting to make £3.4bn in efficiency savings as a result of this acquisition, and says it is "firmly on track" to deliver a $40bn underlying "operating cost run rate" at the end of the year.

Shell's cost-cutting drive includes an ambitious plan to make £22.7bn from asset sales over the next two years and cut 12,500 jobs over the 2015-16 period.