(MENAFN- AFP) Energy giant Royal Dutch Shell on Thursday announced an eight-percent drop in annual net profits owing to a slump in global oil prices and said it would accelerate spending cuts.
Profit after tax dropped to $15.05 billion (13.3 billion euros) in 2014 compared with the Anglo-Dutch company's performance one year earlier, slipping on plunging earnings in the fourth quarter as the cost of crude tumbled.
"Compared with the fourth quarter 2013, earnings... were impacted by the significant decline in (the price of) oil," Shell said in a statement.
Fourth-quarter net profit plunged 57 percent to $773 million compared with the final three months of 2013.
Annual profit excluding exceptional items and changes to the value of its oil inventories rose 16 percent to $22.5 billion.
Shell said it would slash spending by more than $15.0 billion over the next three years, mirroring similar moves by rivals in the energy sector which are also reacting to slumping oil prices by cutting costs.
"The agenda we set out in early 2014 to balance growth and returns has positioned us well for the current oil market downturn," Shell chief executive Ben van Beurden said Thursday.
"We are taking a prudent approach here and we must be careful not to over-react to the recent fall in oil prices. Shell is taking structured decisions to balance growth and returns," he added in the results statement.
Shell noted that lower prices created opportunities for the group to cut costs.
It added that deferring spending in many areas and driving costs down in the supply chain "should result in reduction of potential capital investment for 2015-17 of over $15 billion".
Earlier this month, Royal Dutch Shell and Qatar Petroleum scrapped plans for a petrochemicals project, worth an estimated $6.5 billion.
But it is still investing in expensive projects and on Wednesday signed an agreement with the Iraqi government potentially worth $11 billion to build a large petrochemicals plant in the country's south.
- Oil price shock -
Oil futures have lost more than half their value since June when crude was trading at more than $100 a barrel, amid a supply glut that has been boosted largely by robust US shale oil production and weak global demand.
The falls accelerated in November after the OPEC oil cartel insisted that it would maintain output levels despite already plunging prices. The 12-nation group pumps about 30 percent of global crude.
Shares in Shell slid Thursday, losing more than four percent in value and topping the loser's board on London's benchmark FTSE 100 index, which was down 0.51 percent at 6,790.97 points in late morning deals.
"Shares in Royal Dutch Shell are trading lower after the oil titan posted fourth-quarter adjusted profits that missed analysts' already low estimates," said David Madden, market analyst at traders IG.
"The energy giant has $15 billion worth of spending cuts in the pipeline as the slump in oil price has curtailed its expansion.
"To keep investors sweet the oil company announced a healthy dividend, but that wasn't enough to win back traders' confidence as the enormous cut to capital expenditure signals cautious times ahead."
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