Shell’s profits easily beat expectations, helped by LNG
Shell’s results outshone those of rivals ExxonMobil, Chevron and BP, which all saw sharp declines in profits in the first three months of 2019
London — On Thursday, Royal Dutch Shell reported a small drop in first-quarter profit to $5.4bn, but still easily beat forecasts, helped by stronger trading and liquefied natural gas (LNG) earnings.
Shell’s results outshone those of rivals ExxonMobil, Chevron and BP, which all saw sharp declines in profits in the first three months of the year as a result of lower refining margins and weaker crude and gas prices.
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Shell shares were up 1.4% shortly after trading opened.
“Shell has made a strong start to 2019,” CEO Ben van Beurden said in a statement. “Our integrated value chain enabled our downstream business to deliver robust results despite challenging market conditions.”
Cash generation, which the Anglo-Dutch company has flagged as a key measure of its growth in the past, sagged 9% to $8.6bn as a result of one-off charges.
Free cash flow — cash available to pay for dividends and share buybacks — dropped to $4bn from $16.7bn in the previous quarter and $5.2bn a year earlier.
Shell has targeted free cash flow generation of $25bn to $30bn a year between 2019 and 2021.
Net income attributable to shareholders, based on current cost of supplies (CCS) and excluding identified items, fell 2% to $5.43bn in the first quarter from a year earlier. That topped a profit forecast of $4.54bn, according to a company-provided survey of analysts.
“Overall this was a strong set of results, backed up by solid cash flow delivery in the quarter,” Berenberg analyst Henry Tarr said.
The decline was a result of lower chemicals and refining margins, lower oil prices and lower tax credits, Shell said. Those were partly offset by stronger contributions from trading as well as increased LNG and gas prices compared with the first quarter of 2018.
Shell’s integrated gas business saw a 65% rise in cash generation to $4.2bn as LNG trading helped offset a 6% decline in sales volumes.
BP also saw a drop in profits from lower crude prices and refining but was cushioned by trading, which allows a company to make profit by taking advantage of price differences in different regions.
Shell said its oil and gas production in the quarter declined to 3.752-million barrels of oil equivalent from 3.788-million in the fourth quarter of 2018. The strong results build on a sharp rise in profits last year to $21.4bn, their highest since 2014.
Shell, the world’s biggest dividend payer at $16bn a year, continued a three-year $25bn share buyback programme promised following the acquisition of BG Group in 2016. It said it had repurchased $6.75bn by April 29.
Its dividend was unchanged at $0.47 a share.