Shell earnings surge to highest level in over 3 years on oil price rally

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Royal Dutch Shell products in Torzhok, Russia.

Andrey Rudakov | Bloomberg | Getty Images
Royal Dutch Shell products in Torzhok, Russia.

Oil giant Royal Dutch Shell posted a 42 percent rise in profits in the first quarter of 2018, underpinned by a recent uptick in oil and gas prices.

Net income attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, and excluding identified items, came in at $5.322 billion from a year ago. This compared to a company-provided analyst consensus of $5.277 billion.

Over the same quarter last year, net income was $3.754 billion.

Here are the key first-quarter metrics:

  • Net income attributable to shareholders (on a current cost of supplies basis and excluding identified items) came in at $5.3 billion, versus $3.8 billion in the previous quarter.
  • Capital investment of $5.183 million in the first three months of 2018 vs. $4.720 as reported a year ago.

“Shell’s strong earnings this quarter were underpinned by higher oil and gas prices, the continued growth and very good performance of our Integrated Gas business, and improved profitability in our Upstream business,” CEO Ben van Beurden said in a statement.

The latest figures come at a time when the environment for oil companies is dramatically improving, amid signs the energy market is rebalancing and crude futures have rallied to multi-year highs.

The main driver for a recent uptick in oil prices has been a supply cut from major oil producing group OPEC and Russia, who started to withhold output in January last year. The production cuts are scheduled to continue throughout 2018.

The move has helped to stabilize oil prices and support oil companies in recent quarters. Brent crude traded at $74.44 a barrel on Thursday morning, up 0.6 percent, while West Texas Intermediate (WTI) was at $68.37 a barrel, 0.4 percent higher.

Shell rival BP is due to report its latest figures for the same quarter on Tuesday.

Oil major Shell posts 50 percent rise in net profit, beating expectations

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  • Royal Dutch Shell Chief Executive Officer Ben van Beurden said that “Shell’s three businesses all made resilient contributions to this strong set of results.”
  • The latest earnings come amid an improving environment for oil companies that have had to weather the storm posed by low oil prices

Royal Dutch Shell products in Torzhok, Russia.

Andrey Rudakov | Bloomberg | Getty Images
Royal Dutch Shell products in Torzhok, Russia.

Oil giant Royal Dutch Shell reported a near 50 percent rise in net profit for the third quarter.

Net profit attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, came in $4.1 billion, versus $2.7 billion in the same quarter a year ago. This compared to a company-provided analyst consensus of $3.6 billion. It also beat the Reuters estimate which was $3.569 billion.

Shell said the earnings reflected higher contributions from its downstream and upstream operations (which refer to both the refining division and exploration units) and its integrated gas unit.

Here are the key third-quarter metrics:

  • Cash flow from operating activities: $7.58 billion, down 11 percent from a year ago.
  • Net income attributable to shareholders (on a current cost of supplies basis and excluding exceptional items) $4.1 billion, versus $3.569 billion expected by Thomson Reuters.
  • Shell announced a $0.47 dividend per share.

Royal Dutch Shell Chief Executive Officer Ben van Beurden said that “Shell’s three businesses all made resilient contributions to this strong set of results.”

He said the earnings were evidence of Shell’s “growing momentum” which, he said, strengthens his “firm belief” that the company’s strategy is working.

Shell is our top oil sector pick in Europe: Jefferies  

The latest earnings come amid an improving environment for oil companies that have had to weather the storm posed by low oil prices amid a glut in oil supply and lackluster demand over the last few years.

There are signs that oil markets are rebalancing, however, particularly as major oil exporters including OPEC and non-OPEC countries continue with an agreement to limit oil output.

The move has helped to stabilize oil prices, with Brent crude trading around $60 a barrel and west Texas Intermediate (WTI) around $54, and it has supported oil majors. Shell rival BP reported earnings above expectations earlier this week, doubling its third quarter underlying profit year-on-year.

Shell’s share price was flat on Thursday morning.

Oil markets cautious as another tropical storm heads for Gulf of Mexico

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  • U.S. crude futures were trading at $50.73 per barrel, down 6 cents from their last close
  • Brent crude futures were down 6 cents at $56.94 a barrel
  • Tropical storm Nate is threatening to disrupt the oil industry in the Gulf of Mexico

An oil well owned and operated by Apache Corporation in the Permian Basin are viewed on February 5, 2015 in Garden City, Texas.

Spencer Platt | Getty Images
An oil well owned and operated by Apache Corporation in the Permian Basin are viewed on February 5, 2015 in Garden City, Texas.

Oil markets opened cautiously in Asia on Friday as traders monitored a tropical storm heading for the Gulf of Mexico and as China remained closed for a week-long public holiday.

But the prospect of extended oil production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) helped support prices.

U.S. West Texas Intermediate (WTI) crude futures were trading at $50.73 per barrel at 0016 GMT, down 6 cents from their last close.

Brent crude futures, the international benchmark for oil prices, were down 6 cents at $56.94 a barrel.

Oil market activity was subdued on Friday, due to the ongoing Golden Week holiday in China and because traders were monitoring tropical storm Nate, which is threatening to disrupt the oil industry in the Gulf of Mexico just weeks after several hurricanes pummelled the region, knocking out many oil producing and processing facilities.

The Louisiana Offshore Oil Port (LOOP), one of the country’s most important fuel handling facilities in the Gulf of Mexico, said early on Friday that it had suspended operations until the weather improves.

Nate is currently off the coast of Nicaragua and heading northwest into a region of the Gulf of Mexico populated by offshore oil platforms which pump more than 1.6 million barrels of crude per day (bpd), about 17 percent of U.S. output, according to government data.

BP and Chevron were shutting production at all Gulf platforms, while Royal Dutch Shell and Anadarko Petroleum suspended some production and drilling activity in the Gulf. Exxon Mobil, Statoil and other producers have withdrawn personnel from their platforms.

Despite this, markets were not far off their closing levels from the previous day, when prices rose by around 2 percent on the prospect of an extended production cut deal lead by OPEC and Russia.

King Salman of Saudi Arabia, OPEC’s de-facto leaders, met with Russian President Vladimir Putin in Moscow on Thursday to discuss, among other things, oil policy.

Saudi Arabia made no firm pledge to extend a deal between OPEC, Russia and other producers on cutting supplies but said it was “flexible” regarding Moscow’s suggestion to prolong the pact until the end of 2018.

“The visit raised the possibility of the current production cut agreement being extended if the crude oil inventories remain stubbornly high,” ANZ bank said.

A deal to cut around 1.8 million bpd in production has been in place since January and is currently due to expire at the end of March 2018.