Shell to increase cost cuts and exit up to 10 countries as a result of the BG deal
Shell’s takeover of BG Group was completed in February of this year Reuters

Royal Dutch Shell's profit rose sharply in the third quarter of its financial year, as the company reaped the dividends of the cost-cutting measures it implemented earlier this year, although it warned the outlook remained challenging due to the ongoing weakness in oil prices.

In the three months to the end of September, the oil giant said earnings attributable to shareholders adjusted for one-time items and inventory changes rose 17% year-on-year to $2.79bn (£2.28bn).

The Anglo-Dutch company, which acquired BG in February for £35bn, attributed the turnaround in earnings to increased production volumes mainly from BG assets and lower operating expenses, which more than offset the expenses related to the consolidation of its smaller sector peer.

However, weaker refining industry conditions and persistent weakness in the oil market had a negative impact on the results, the company added.

Group chief executive Ben van Beurden said on Tuesday (1 November), the integration of BG has been completed ahead of schedule and it has been an important catalyst for the "significant and lasting changes" the company aims to achieve.

However, Shell, which has maintained its dividend unchanged for the third quarter running, was forced into implementing cost-cutting measures across its operations throughout the year.

In May, the oil giant unveiled plans to increase the number of job cuts in 2016 by approximately 20% as it seeks to cut costs due to weakness in oil prices, only a month after revealing it would close three of its offices in the UK, a move which will affect approximately 1,600 employees, as part of its takeover of BG.

The group said a further 2,200 jobs will be cut across its worldwide divisions, including 450 in its North Sea operation in the UK, bringing the tally of jobs to be axed to 12,500.

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

The company added it was actively working on 16 material asset sales as part of its planned $30bn divestment programme, indicating it expects cash flow to be further boosted by new projects.

Once fully operational, projects started up in 2016 are expected to add more than 250,000 barrels of oil equivalent per day, while income from new projects started between 2014 and 2018 is expected to total $10bn in 2018, at an average $60 oil price.