Shell says income up with rising oil prices

Shell launched a $25bn share buyback programme in July, boosting shareholder returns

Third-quarter profit for Royal Dutch Shell soared to its highest in four years, boosted by rising crude prices as the Anglo-Dutch company pushed ahead with one of the world’s largest share buyback programmes.

The world’s second-largest listed oil and gas company saw its cash generation from operations rise by nearly 60 per cent to $12.1 billion, as deep cost savings in recent years filtered through.

“Good operational delivery across all Shell businesses produced one of our strongest-ever quarters,” said chief executive Ben van Beurden.

Net income attributable to shareholders in the quarter, based on a current cost of supplies and excluding identified items rose 39 per cent to $5.62bn from a year ago. That compared with a company-provided analysts’ consensus of $5.766bn.

The profits benefited from stronger oil and gas prices as well as bigger contributions from trading operations, but was offset by weaker refining margins, tax and currency exchange effects.

Shell launched a $25bn share buyback programme in July, making good on a promise to boost shareholder returns following the 2016 acquisition of BG Group, in a show of confidence in its future cash generation and profit growth outlook.

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

The company said it completed the first tranche of buybacks in October for $2bn and was launching a second tranche on Thursday of up to $2.5bn by January 28.

Shell’s shares came under pressure in recent months after three disappointing quarterly results that raised concerns over its ability to meet the $25bn share buyback target on top of $15 annual dividend payout, the world’s biggest.

Debt levels remained stubbornly high. Shell’s debt ratio versus company capitalisation, known as gearing, declined to 23.1 per cent in the quarter from 23.6 per cent at the end of June.

Oil and gas production in the quarter declined 2 per cent from a year earlier to 3.596 million barrels of oil equivalent. Shell’s B shares fell 1.5 per cent to 2,525.5 pence at 8:13am in London.

Most oil and gas equities were down in Europe after a drop in crude prices, with the Stoxx Europe 600 Oil & Gas Index 1 per cent lower.