Shell's profit surges as oil sector rebounds

[LONDON] Royal Dutch Shell said net profit more than doubled in the first quarter, joining its peers in beating analyst forecasts as rebounding oil prices and refining margins lifted revenue after a near three-year downturn.

A 55 per cent rise in oil prices from a year ago and deep cost cuts boosted cash generation, enabling the Anglo-Dutch company to cover spending and dividend payouts, while reducing debt following its US$54 billion acquisition of BG Group last year.

Shell remains on track to hit its US$30 billion asset disposal programme by 2018 to finance the BG acquisition, selling around US$20 billion since 2016, including a large portfolio in the North Sea and exiting Canada's oil sands. "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 said in a note after the results on Thursday.

Europe's largest oil and gas company joined rivals BP , Exxon Mobil, Chevron and Total in beating analysts' quarterly profit forecasts.

It generated a cash flow of US$9.5 billion in the quarter, up 13 fold from a year earlier, and the strongest among its peers. Free cash flow rose to US$5.2 billion from a negative US$16.26 billion a year earlier.

Shell's shares, rose 2.6 per cent at the market open, outperforming a 0.5 per cent gain in London's FTSE 100 index .

Net income attributable to shareholders in the quarter, based on a current cost of supplies (CCS) and excluding exceptional items rose 142 per cent 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. "We saw notable improvements in Upstream and Chemicals, which benefited from improved operational performance and better market conditions," said chief executive Ben van Beurden.

Oil and gas production, known as upstream, rose 2 per cent 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 per cent to US$2.49 billion.

Refined oil products sales are expected to decrease by 200,000 barrels per day (bpd) in the second quarter of 2017 following the sale of refineries in Malaysia and Denmark and the splitting of the Motiva Enterprises joint venture with Saudi Aramco in the United States, the company said.

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

The company stuck to plans to invest US$25 billion this year, at the lower end of the long-term target.

REUTERS