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Shell Set To Topple Exxon As Big Oil’s Biggest Cash Generator

Offshore rig

Higher oil prices helped Royal Dutch Shell (NYSE: RDS.A) to more than double its 2017 profit from a year earlier and generate cash flow that could beat Exxon’s cash generation when the U.S. supermajor reports earnings early on Friday.

Shell’s current cost of supply (CCS) earnings—the company’s proxy for net income—jumped to $16.182 billion in 2017 from $7.455 billion in 2016. Cash flow from operations surged to $35.65 billion last year from $20.615 billion in 2016. Investors have been closely watching the cash flow to gauge the performance of Shell and other majors.

This figure sets Shell on track to topple Exxon as the supermajor generating the most cash in the industry. Analysts at Jefferies expect Exxon to report on Friday cash flow of $32.6 billion for 2017.

Shell, however, reported lower-than-expected cash flow from operating activities for Q4, at $7.275 billion, down by 21 percent compared to Q4 2016. Shell attributed the lower cash flow to higher tax payments and increased cash requirements for the trading business.

“Unfortunately, resilient earnings do not appear to have translated into cash generation,” RBC Capital Markets analyst Biraj Borkhataria said in a note, as carried by Bloomberg.

The Q4 cash flow drop marred otherwise strong Q4 and full-2017 figures, and sent Shell shares tumbling 5 percent in London at opening on Thursday, before recovering to a loss of 2 percent at 4.35 p.m. GMT. Shell shares in New York were down 1.8 percent at noon EST.

Related: What's Behind Canada's Oil Driller Exodus?

Still, full-year cash flow and the more than doubled profits showed that Shell is making as much money at $60 oil when it did at oil prices at $100.

“2017 was a year of strong financial performance for Shell. A year of transformation, in which we showed we have what it takes to deliver a world-class investment case,” Royal Dutch Shell CEO Ben van Beurden said in the company statement.

By Tsvetana Paraskova for Oilprice.com

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  • CorvetteKid on February 01 2018 said:
    How could they incorrectly lead the financial community as to the trend in cash flows such that they open down 5% ? The items were mostly 1-timer govt-related (probably related to PSCs and other government contracts).

    Didn't RDS alert the investment community ? Apparently not.

    The results were generally good and the fact that the stock got creamed at the open shows that Royal Dutch Shell needs to do a much better job communicating with their investors and Wall Street.

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