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Shell's (RDS.A) Q1 Earnings Jump on Higher Commodity Prices
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Europe’s largest oil company Royal Dutch Shell plc reported strong first-quarter results as rebounding commodity prices and continued improvement of its integrated gas unit helped the company in coming out with better-than-expected numbers.
The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of $1.28, going past the Zacks Consensus Estimate of $1.24 and the year-ago adjusted profit of 92 cents. The profit growth further confirms the industry's resurgence from the deep oil slump.
With oil prices stabilizing above the $60-a-barrel level, Shell said that it is going to proceed with the Vito deepwater development in the U.S. Gulf of Mexico after cutting costs dramatically.
Revenues of $91,114 million were 24.3% above the first-quarter 2017 sales of $73,311 million and beat the Zacks Consensus Estimate of $81,020 million.
Meanwhile, operating expenses increased in the quarter, coming in at $9,719 million, compared to $9,282 million in the corresponding period last year.
Royal Dutch Shell PLC Price, Consensus and EPS Surprise
Upstream: The segment recorded a profit of $1,551 million (excluding items) during the quarter, soaring from the paltry $540 million (adjusted) achieved in the year-ago period.
This primarily reflects the impact of higher oil and gas realizations. At $60.66 per barrel, the group’s worldwide realized liquids prices were 25% above the year-earlier levels while natural gas prices were up 13% to $4.86 per thousand cubic feet.
However, asset sales – specifically in Canada, UK North Sea and Gabon – reduced its oil and gas production. Shell’s upstream volumes averaged 2,867 thousand oil-equivalent barrels per day (MBOE/d), 5% lower than the year-ago period. Liquids contributed approximately 55% to Shell’s total volumes, while natural gas accounted for the remaining portion.
Downstream: In the downstream segment, which focuses on refining, marketing and retailing, the Anglo-Dutch super-major reported adjusted income of $1,687 million, 32.2% less than the $2,489 million earned in the year-ago period. The negative comparison reflects the impact of a weaker refining environment, foreign currency translation effects and lower trading contributions.
Integrated Gas: The Integrated Gas unit reported adjusted income of $2,439 million, more than doubling from the $1,181 million in January-March quarter of 2017. Results were favorably impacted by an increase in commodity prices, higher LNG production, as well as increased contributions from trading.
Cash Flow
During the quarter under review, Shell generated cash flow from operations of $9,427 million, returned $4,000 million to shareholders through dividends and spent $5,183 million on capital projects. Despite falling marginally from the year-ago period, the company’s resilient cash generation has helped it to cover cash dividend payments and interest. Shell has already aborted its two-and-a half-year long scrip dividend program as cost-containment efforts and divestment strategies have paid off. Importantly, the group raked in $5,178 million in free cash flow during the first quarter.
Balance Sheet
As of Mar 31, 2018, the company had $21,927 million in cash and $88,022 million in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 24.7%, down from 28.3% a year ago. The improvement in the group’s debt ratio was helped by cost cuts and asset sales.
Earnings Schedules of Other Oil Supermajors
Among the major integrated players, Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) are scheduled to release tomorrow, while BP plc (BP - Free Report) will report first-quarter earnings early next week.
Zacks Rank & Stock Picks
Royal Dutch Shell, which recently announced the sale of its downstream assets in Argentina for $950 million, holds a Zacks Rank #2 (Buy).
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Shell's (RDS.A) Q1 Earnings Jump on Higher Commodity Prices
Europe’s largest oil company Royal Dutch Shell plc reported strong first-quarter results as rebounding commodity prices and continued improvement of its integrated gas unit helped the company in coming out with better-than-expected numbers.
The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of $1.28, going past the Zacks Consensus Estimate of $1.24 and the year-ago adjusted profit of 92 cents. The profit growth further confirms the industry's resurgence from the deep oil slump.
With oil prices stabilizing above the $60-a-barrel level, Shell said that it is going to proceed with the Vito deepwater development in the U.S. Gulf of Mexico after cutting costs dramatically.
Revenues of $91,114 million were 24.3% above the first-quarter 2017 sales of $73,311 million and beat the Zacks Consensus Estimate of $81,020 million.
Meanwhile, operating expenses increased in the quarter, coming in at $9,719 million, compared to $9,282 million in the corresponding period last year.
Royal Dutch Shell PLC Price, Consensus and EPS Surprise
Royal Dutch Shell PLC Price, Consensus and EPS Surprise | Royal Dutch Shell PLC Quote
Segmental Performance
Upstream: The segment recorded a profit of $1,551 million (excluding items) during the quarter, soaring from the paltry $540 million (adjusted) achieved in the year-ago period.
This primarily reflects the impact of higher oil and gas realizations. At $60.66 per barrel, the group’s worldwide realized liquids prices were 25% above the year-earlier levels while natural gas prices were up 13% to $4.86 per thousand cubic feet.
However, asset sales – specifically in Canada, UK North Sea and Gabon – reduced its oil and gas production. Shell’s upstream volumes averaged 2,867 thousand oil-equivalent barrels per day (MBOE/d), 5% lower than the year-ago period. Liquids contributed approximately 55% to Shell’s total volumes, while natural gas accounted for the remaining portion.
Downstream: In the downstream segment, which focuses on refining, marketing and retailing, the Anglo-Dutch super-major reported adjusted income of $1,687 million, 32.2% less than the $2,489 million earned in the year-ago period. The negative comparison reflects the impact of a weaker refining environment, foreign currency translation effects and lower trading contributions.
Integrated Gas: The Integrated Gas unit reported adjusted income of $2,439 million, more than doubling from the $1,181 million in January-March quarter of 2017. Results were favorably impacted by an increase in commodity prices, higher LNG production, as well as increased contributions from trading.
Cash Flow
During the quarter under review, Shell generated cash flow from operations of $9,427 million, returned $4,000 million to shareholders through dividends and spent $5,183 million on capital projects. Despite falling marginally from the year-ago period, the company’s resilient cash generation has helped it to cover cash dividend payments and interest. Shell has already aborted its two-and-a half-year long scrip dividend program as cost-containment efforts and divestment strategies have paid off. Importantly, the group raked in $5,178 million in free cash flow during the first quarter.
Balance Sheet
As of Mar 31, 2018, the company had $21,927 million in cash and $88,022 million in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 24.7%, down from 28.3% a year ago. The improvement in the group’s debt ratio was helped by cost cuts and asset sales.
Earnings Schedules of Other Oil Supermajors
Among the major integrated players, Exxon Mobil (XOM - Free Report) and Chevron (CVX - Free Report) are scheduled to release tomorrow, while BP plc (BP - Free Report) will report first-quarter earnings early next week.
Zacks Rank & Stock Picks
Royal Dutch Shell, which recently announced the sale of its downstream assets in Argentina for $950 million, holds a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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