Shell Q1 profit beat analysts’ expectations
Royal Dutch Shell Q1 profit more than doubled as oil prices rebounded and refining margins lifted revenue after a nearly three-year downturn.
The 55 per cent jump in oil prices helped Shell cover expenses and dividend payouts as well as reducing debt following its $54 billion purchase of BG Group last year.
The company is on track to dispose of $30 billion in assets by 2018 to finance the BG purchase. Since 2016, Shell has sold a large portfolio in the North Sea and its Canadian oilsands assets.
“This is now the third consecutive quarter of dividend coverage, which coupled with the divestments to be cashed in later in the year, suggests Shell is shaping up to have a much better performance this year,” RBC Capital Markets analyst Biraj Borkhataria told Reuters.
Shell along with BP, Exxon, Chevron and Total beat analysts 2017 Q1 expectations.
As oil prices continue to hover in the $50/barrel range, Shell will continue to make cost cutting a priority. Since 2014, Shell has cut 12,500 jobs and Chief Financial Officer Jessica Uhl said in a call with analysts that there is room for further job reductions.
In the first quarter of 2017, Shell generated $9.5 billion, up 13-times over Q1 2016. Free cash flow was up to $5.2 billion during the first quarter from a negative $16.26 billion this time last year.
Shares were steady in trading on Thursday following the release of the Shell Q1 results.
Reuters reports net income attributable to shareholders in Q1, based on current cost of supplies and excluding exceptional items rose 142 per cent to $3.75 billion, compared to a company-provided analysts’ consensus of $3.05 billion.
In 2016, net income attributable to shareholders was $1.55 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.
With a number of new fields in Brazil and Kazakhstan coming online, upstream production rose by 2 per cent in the first quarter to 3.752 million barrels of oil equivalent from 3.905 million boe/d in the fourth quarter of 2016.
The downstream division boosted its earnings by 24 per cent to $2.49 billion.
After the sale of refineries in Malaysia and Denmark and the splitting of the Motiva Enterprises joint venture with Saudi Aramco in the US, refined oil products sales are expected to drop by 200,000 b/d in the second quarter of 2017.
Shell’s debt ration versus company capitalization, or gearing, dropped in the first quarter to 27.2 per cent from 28 per cent in the fourth quarter.
The company says it will invest $25 billion this year, which is the lower end of the long-term target.