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Shell’s Upstream Segment Reports Another Loss in 2Q16

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Shell’s segments

Shell’s upstream (RDS.A) segment earnings, which stood at -$469 million in 2Q15, slipped to about -$1,325 million in 2Q16, excluding the identified items discussed in the first part of this series.

This is on the back of falling crude oil and natural gas prices, partly offset by lower operating and exploration costs, as well as higher liquids production volumes. Brent prices, which averaged $62 per barrel in 2Q15, slipped down to $46 per barrel in 2Q16.

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Shell’s integrated gas and downstream segments’ earnings in 2Q16

Shell’s Integrated Gas segment reported a fall in earnings by 38% over 2Q15 to $868 million in 2Q16. This is due to lower oil and LNG prices and a rise in depreciation and operating costs due to the BG acquisition. This was partly offset by higher LNG and liquids volumes mainly from BG. Plus, Shell’s Downstream segment’s earnings fell by 39% over 2Q15 to $1,816 million in 2Q16 due to a weaker refining environment.

Although earnings from the Integrated Gas and Downstream segments fell, they contributed a major portion of Shell’s 2Q16 earnings.

Shell’s peers

Shell’s peers BP (BP) and Suncor (SU) have also seen their segment dynamics change. BP’s upstream segment, which contributed 20% to its URC EBIT (underlying replacement cost and earnings before interest and tax) in 2Q15, contributed 2% in 2Q16. Suncor’s (SU) oil sands segment, which earned profits in 2Q15, posted a loss in 2Q16.

If you’re looking for exposure to energy sector stocks, you can consider the Energy Select Sector SPDR ETF (XLE).

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