The UK’s largest oil company, Royal Dutch Shell (LON:RDSA), saw profits for 2016 suffer their worst drop in a decade in the wake of the sizeable acquisition of rival company BG.
Profits at the company fell from $3.8 billion in 2015 to $3.5 billion, with the fourth quarter seeing a significant drop to $1 billion from $1.8 billion the year previously.
The company attributed the profit dip to their acquisition of rival oil group BG, which broke records when it was announced last year. The $52 billion deal created the world’s largest producer of oil and gas.
On a conference call, chief executive Ben van Beurden asked investors to “bear with us” as Shell integrated the two companies, saying that “2016 was the transition year, 2017 needs to be the delivery year.”
He underlined that the results were more positive that they look from the outset, saying: “We are reshaping Shell and delivered a good cash flow performance this quarter with over $9 billion in cash flow from operations. Debt has been reduced and, for the second consecutive quarter, free cash flow more than covered our cash dividend”.
Van Beurden also told the BBC that the cash inflow during the final quarter had been $9 billion, more than covering the dividend, and that the company had also been able to repay $4.5 billion worth of debt.
“Looking ahead, we will further focus the portfolio and strengthen the company’s financial framework in 2017. Our strategy is starting to pay off and in 2017 we will be investing around $25 billion in high quality, resilient projects. I’m confident 2017 will be another year of progress for Shell to become a world-class investment,” he concluded.
Despite the lower-than-expected figures, investors seemed to be cheered by van Beurden’s optimism. Shares in Royal Dutch Shell rose in early trading, and are currently up 1.57 percent at 2,170.50 (1035GMT).