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Shell and BP tighten the belt over low oil prices with spending cuts

screen-shot-2016-11-02-at-11-05-51PUBLISHED: 07:22, Wed, Nov 2, 2016 | UPDATED: 07:41, Wed, Nov 2, 2016

The FTSE 100 rivals warned investors not to expect a big upturn next year as they plan for prices in the low $50s-per barrel compared with current rates of about $48 for Brent.

But their efforts to balance investment in future growth while battling tough trading conditions and rising debt met with contrasting reactions as Shell’s share price rallied 84p to 2199p while BP slumped 21¾p to 462p.

Shell, whose £35billion acquisition of BG Group made it the world’s top liquefied natural gas producer, boosted underlying net profit for the three months to the end of September by 18 per cent to $2.8billion, compared with analysts’ forecasts of $1.71billion.

Its capital spending this year will be about $29billion, $18billion below what it and BG spent in 2014, while next year it will spend about $25billion, at the lower end of its $25-30billion previous guidance.

Chief executive Ben van Beurden, pictured, said: “Shell delivered better results this quarter, reflecting strong operational and cost performance. But lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain.

“Our investment plans and portfolio actions are focused firmly on reshaping Shell into a world-class investment case at all points in the oil-price cycle, through stronger returns and improved free cash flow per share. We are making good progress towards this aim in spite of challenging market conditions.

“We have been managing the company through the downcycle by reducing costs and investment levels, while executing our asset sales plans and starting up new projects. Costs are set to reduce further as deal synergies and improvements are delivered in full.”

BP’s net profit nearly halved to $933million although this was better than analysts’ forecasts of about $780million. Its investment this year will fall to about $16billion from an earlier forecast of $17-19billion and should be between $15-17billion in 2017.

BP’s chief financial officer, Brian Gilvary, hailed “good progress in adapting to the challenging price and margin environment”, but any firming in oil prices would not be “significantly north of what we see now”.

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