Royal Dutch Shell (NYSE:RDS.A), one of the last oil supermajors to report Q1 earnings this season, did not disappoint, beating expectations as it reported on Thursday underlying profits more than doubled and cash flows soaring more than fourteen times from the same quarter a year ago.
Shell joins the other supermajors Exxon, Chevron, BP, and Total—all of which reported surging Q1 profits beating analyst estimates—in the latest sign that the oil price rebound compared to Q1 2016 helped oil majors turn the corner of the downturn.
Shell reported current cost of supplies (CCS) earnings excluding identified items—the closest in-house definition to a net profit—of US$3.863 billion for the first quarter, a 136-percent surge from the US$1.636 billion earnings in Q1 2016, and easily beating consensus estimates of US$3.05 billion.
Shell’s upstream business returned to a profit of US$540 million in the first quarter this year, from a loss of US$1.437 billion for the same period last year, benefiting from higher realized oil and gas prices, increased production volumes, and improved operational performance. In the downstream, earnings rose 24 percent annually to US$2.489 billion, on the back of stronger chemicals and refining industry conditions and lower operational expenses.
Shell’s cash flow from operating activities soared to US$9.508 billion from US$661 million in Q1 2016. The group reduced net debt to US$72.034 billion at end-March, from US$73.346 billion at end-December 2016.
“The first quarter 2017 was a strong quarter for Shell. Cash flow from operating activities of $9.5 billion and free cash flow of $5.2 billion enabled us to reduce debt, and cover our cash dividend for the third consecutive quarter. We saw notable improvements in Upstream and Chemicals, which benefited from improved operational performance and better market conditions,” chief executive Ben van Beurden said in the company statement.
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Shell is proceeding with its divestment plan and has US$20 billion divestments completed or announced, aimed at strengthening the balance sheet, van Beurden said.
“Following the successful integration of BG, we are rapidly transforming Shell through the consistent and disciplined execution of our strategy. This includes investing around $25 billion this year and the delivery of new projects, which we expect to generate $10 billion in cash flow from operating activities by 2018,” the manager noted.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…