Shell steps up buy-backs as cash flow surges

LONDON: Royal Dutch Shell Plc stepped up its share buy-back programme as its cash flow surged on higher crude prices, even as profit fell slightly short of expectations.

Cash flow from operations including working capital movements was US$12.09bil, the highest since 2014. The company said it will repurchase US$2.5bil of shares up to Jan 28, compared with US$2bil in the previous tranche.

The pace of buy-backs has been a key point for investors this year, who are keen for Shell to share the proceeds of recovering oil prices.

The company is now generating more than enough cash to cover dividends and its US$25bil repurchase programme.

Excluding working capital movements, cash flow of US$14.7bil was the highest in a decade. Another number that could please Shell’s shareholders is the return on average capital employed, which rose to 7.1% from 4.6% a year earlier.

Chief executive officer Ben van Beurden has made lifting returns above 10% one of his principal goals.

Shell’s profit again missed expectations due to one-time charges, including currency movements and taxes.

This could be problematic for analysts, who have questioned whether the company can still be a “world class investment case” if its earnings don’t become more predictable.

The Anglo-Dutch energy company dominates the gas business, but liquefied natural gas sales were short of expectations as production fell from the second quarter.

Its next big project startup is a floating LNG facility in Australia called Prelude, but there was no mention of that in the statement.

Adjusted net income climbed to US$5.62bil in the third quarter from US$4.10bil a year ago.

That missed the US$5.73bil average estimate of 13 analysts.

Oil and gas production of 3.596 million barrels equivalent a day was lower than the 3.657 million barrels equivalent a day a year earlier.

Shell’s gearing, the ratio of net debt to total capital, fell to 23.1% from 25.7% a year earlier.