Shell impresses with jump in earnings
l Energy giant beats expectations on tailwinds such as higher oil price
Royal Dutch Shell has reported a large rise in third- quarter profits after being boosted by higher oil prices and increased production.
The group, which can trace its roots back to the early 19th century, said adjusted earnings rose 47 percent to $4.1 b ill ion(£3bn)int he period as chief executive Ben van Beurden hailed the figures. It comes as t he price of crude rose above $ 60 per barrel this week, its highest price for five months.
Shell said it benefited from stronger refining and chemicals industry conditions, increased oil and gas prices, and higher production from new fields.
Total production rose 2 per cent to 3.7 million barrels a day in the quarter.
Shell’ s upstream oil and gas producing unit booked an increase in earnings from $4 mil lion to$562m while downstream profit grew from $ 2.1bn to $ 2.7bn.
Van Beurden added: “Shell’s three businesses all made resilient contributions to this strong set of results.
“Upstream generated almost
BEN VAN BEURDEN
half of the$10bncashf low from operations excluding working capital this quarter, at an average Brent oil price of $ 52 per barrel, and this was complemented by good cash contributions from our growing Integrated Gas business and from Downstream.
“This competitive performance is further evidence of Shell’s growing momentum, and strengthens my firm belief that our strategy is working.”
Shell is also embarking on an ambitious cost- cutting drive and a $ 30bn divestment initia- tive. To this end, the oil major offloaded $ 187m of upstream and $ 1 . 1 5bn of downstream assets in the quarter, including a 50 percent share in Sad af, the petrochemicals joint venture in Saudi Arabia.
Shell also announced this week that it has completed the sale of a package of North Sea assets for up to $ 3.8bn to smaller rival Chrysaor.
The group also said the dividend remained unchanged at 47 cents a share.
Nic ho lasHyett, equity analyst at Hargreaves Lansdown, said: “A strong cash flow performance this quarter is likely to increase calls for management to scrap a scrip dividend policy that is seeing it issue almost $ 1bn of new shares to shareholders every quarter. That can’t come soon enough for us.
“The scrip has served a useful purpose, allowing Shell to maintain its dividend when cash was strapped. But the pressure is easing and issuing shares that are equivalent to over 1 per cent of the company’s market cap on an annual basis is not only diluting existing shareholders but increasing future dividend liabilities as well.”
Also commenting was Lee Wild, head of equity strategy at Interactive Investor, who noted that Shell’s UK share - holders are still benefiting from a“generous” dividend paid in dollars, boosted by the weak pound.
He also said the increase in third- quarter profit was much better than his team expected, adding: “Oil looks comfortable at $ 60 for now, although Shell’s cash generation and obvious determination never to cut the dividend mean it will keep paying out even if oil prices come off the boil.
“Ben van Be ur den’ s talk of ‘ growing momentum’ should be further comfort to shareholders .”
“This competitive performance is further evidence of Shell’s growing momentum, and strengthens my firm belief that our strategy is working.”