Europe’s largest oil company Royal Dutch Shell plc reported strong third-quarter earnings amid improvement in production – due largely to the BG assets – and cost structure.

With its outperformance, Shell joins integrated peers like Exxon Mobil Corp. (XOM Quick QuoteXOM - Free Report) , Chevron Corp. (CVX Quick QuoteCVX - Free Report) and BP plc (BP Quick QuoteBP - Free Report) in adapting to low commodity prices to report earnings beats.

The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items) of 70 cents, well above the Zacks Consensus Estimate of 54 cents.

However, the bottom line fell from the year-ago adjusted profit of 76 cents on continued weakness in commodity prices and depressed refining margins.

Revenues were down 6% to $61,855 million and also missed the Zacks Consensus Estimate of $67,997 million.

Confirms Dividend & Outlines 2017 Capex: Putting an end to speculation, Shell confirmed its quarterly dividend at 47 cents per share and said that it expects to spend $25 billion next year on capital investments – at the bottom of the previously stated range.

Segmental Performance

Upstream: Upstream segment recorded a marginal income of $4 million (excluding items) during the quarter, turning around from the $582 million (adjusted) loss in the year-ago period.

This primarily reflects the impact of a rise in production on the back of contribution from the BG assets, reduced costs and lower taxation. To some extent, these were offset by lower oil and gas prices and depreciation charges associated with the BG takeover.

Shell’s upstream volumes averaged 2,683 thousand oil-equivalent barrels per day (MBOE/d), 21% higher than the year-ago period. While crude oil production increased 25%, natural gas output was up 15%, thanks to the contribution from BG Group that was acquired earlier in the year. Liquids contributed approximately 61% to Shell’s total volumes, while natural gas accounted for the remaining portion.

Production during the quarter compared with the year-ago quarter included volumes from new field start-ups and continued ramp-up of existing fields – particularly Erha North ph2 in Nigeria and the Corrib gas field in Ireland, Sabah Gas Kebabangan in Malaysia and Stones in the U.S. – that boosted output by roughly 51 MBOE/d.

Shell’s worldwide realized liquids prices were 11% below the year-earlier levels, while natural gas prices were down 31%.

Downstream: In the Downstream segment, the Anglo-Dutch super-major reported adjusted income of $2,078 million, 21% less than the $2,617 million earned in the year-ago period. The negative comparison reflects the impact of weaker results from refining operations, partly offset by lower costs.

Integrated Gas: The Integrated Gas unit reported adjusted income of $931 million as against $918 million in Jul-Sep quarter of 2015. Results were buoyed by improved LNG and liquids output (mainly contributed by the BG assets), better operational performance, cost saving initiatives and lower well write-offs. Partly offsetting these factors were lower LNG prices and higher BG-related expenses.

Cash Flow

During the quarter under review, Shell generated cash flow from operations of $8,492 million, returned $3,800 million to shareholders through dividends and spent $7,700 million on capital projects.

Balance Sheet

As of Sep 30, 2016, this Zacks Rank #2 (Buy) company had $19,984 million in cash and $97,829 million in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 29.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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