Thursday 4 May 2017

Shell profits soar as oil sector makes a comeback


Royal Dutch Shell reported a sharp rise in net profit on Thursday, beating analyst forecasts and joining its peers as stronger oil prices and improved refining margins boosted revenue after nearly three years of downturn.

A billion dollars in cost savings and budget cuts made over the past three years, as well as around US$20 billion of asset sales following the US$54 billion acquisition of BG Group last February, also helped increase cash flow and boost profits.

After completing the integration of BG Group in the third quarter of last year, the company and investors are turning their focus to increasing revenue and reducing debt as oil prices appear to recover.

A near 55% rise in oil prices in the first quarter compared with a year earlier to around US$54 a barrel was the main driver of earnings growth.

Shell, Europe's largest oil and gas company, generated a cash flow of US$9.5 billion in the quarter, up 13 fold from a year earlier, enabling it to cover its dividend and reduce debt for a third quarter in a row.

Oil and gas production, known as upstream, rose 2% in the quarter to 3.752 million barrels of oil equivalent from 3.905 million boed in the fourth quarter of 2016 as a number of new fields continued to ramp up in Brazil and Kazakhstan in particular.

Refining and marketing earnings also rose 20% to US$2.49 billion.

"We saw notable improvements in Upstream and chemicals, which benefited from improved operational performance and better market conditions," said chief executive Ben van Beurden.

The Anglo-Dutch company joined rivals in reporting better-than-expected results, after earnings from BP, Exxon Mobil, Chevron and Total all beat analysts' forecasts.

Shell's debt ratio versus company capitalisation, known as gearing, declined in the first quarter to 27.2% from 28% in the fourth quarter.

Net income attributable to shareholders in the quarter, based on a current cost of supplies and excluding exceptional items rose 142% to US$3.75 billion, compared with a company-provided analysts' consensus of US$3.05 billion.

A year ago, net income attributable to shareholders was US$1.55 billion. - Reuters