Shell's full year profit falls 8% but oil giant maintains dividend

Oil giant Royal Dutch Shell's annual profit fell almost 10%, while its fourth quarter profit missed analysts' forecast, after the company booked $500m (£394.5m) worth of impairment costs related to a deferred tax reassessments.

In the final three months of its financial year, the FTSE 100-listed group reported a 14% year-on-year increase in profits adjusted for one-time items and inventory changes advanced to $1.8bn, falling short of the expected $2.8bn figure.

Despite the lower-than-expected fourth quarter profit, however, the company maintained its total dividend for the full year unchanged at 1.88 cents per share.

Europe's largest oil company reported current cost of supply (CSS) earnings, its preferred way of measuring profit, of $3.53bn for the whole of 2016, 8% lower year-on-year, while excluding exceptional items, CCS earnings in 2016 fell 37% from the previous year to $7.18bn.

Production in the fourth quarter, however, rose 28% year-on-year to 3.91 million barrels of oil equivalent a day (bpd). On an annual basis, oil and gas production averaged 3.7 million bpd, rising 24% year-on-year, boosted by the performance of BG Group, which the Anglo-Dutch company purchased in February last year.

Excluding the newly-acquired company, however, production declined 2% from 2015, the group said.

Shell's upstream unit producing oil and gas reported a CCS loss of $2.70bn, compared with a $2.25bn loss last year, while the downstream unit saw earnings fall to $7.24bn from $9.74bn. Meanwhile, income attributable to shareholders more than doubled last year, jumping from $1.93bn to $4.57bn

Cashflow from operations beat analyst expectations, but declined to $20.61bn from $29.81bn.

Group chief executive Ben van Beurden said the company was in the process of reshaping its strategy, adding he remained confident over the group's outlook.

"Debt has been reduced and, for the second consecutive quarter, free cash flow more than covered our cash dividend," he said.

"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 $25bn in high quality, resilient projects. I'm confident 2017 will be another year of progress for Shell to become a world-class investment."

Earlier this week, Shell agreed to offload holdings in 10 North Sea oil fields in a deal worth up to £3.1bn.

The oil major said it will sell its interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond, Schiehallion and Erskine transferring them to UK independent explorer Chrysaor.

The move is part of Shell steamlining its worldwide assets after it completed its £50bn purchase of BG last February. The deal greatly expands Shell's presence in the gas markets, lessening its reliance on oil production, which has seen prices fall by more than half over the last three years to around $55 per barrel for Brent Crude.