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Shell (RDS.A) Q4 Earnings Miss, Sales Slump, Dividend Raised

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Europe’s largest oil company Royal Dutch Shell plc (RDS.A - Free Report) reported fourth-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of 10 cents. The bottom line came in below the Zacks Consensus Estimate of 17 cents and plunged from the year-ago profit of 74 cents per ADS.

The underperformance mainly stemmed from the coronavirus-induced commodity price collapse, together with lower production and refining margins.

The Hague-based Shell reported revenues of $45 billion, which were 47% below fourth-quarter 2019 sales of $85.1 billion.

On a somewhat encouraging note for investors, Royal Dutch Shell boosted its quarterly dividend by about 4% to 17.35 cents — the second consecutive hike in payout — after cutting it by two-thirds last year.

Royal Dutch Shell PLC Price, Consensus and EPS Surprise

Royal Dutch Shell PLC Price, Consensus and EPS Surprise

Royal Dutch Shell PLC price-consensus-eps-surprise-chart | Royal Dutch Shell PLC Quote


Operational Performance

Upstream: The segment incurred a loss of $748 million (excluding items) against profit of $709 million (adjusted) in the year-ago period. This primarily reflects the impact of sharply lower oil and gas prices as well as production decline.

At $40.34 per barrel, the group’s worldwide realized liquids prices came in 29% below the year-earlier levels while natural gas prices were down 22%.

Shell’s upstream volumes averaged 2,371 thousand oil-equivalent barrels per day (MBOE/d), down 14% from the year-ago period due to the OPEC+ production cut agreement and hurricane-related production disruptions in the U.S. Gulf of Mexico. Liquids production totaled 1,537 thousand barrels per day (down 10% year over year), while natural gas output came in at 4,837 million standard cubic feet per day (down 20%).

Oil Products: In this segment, the Anglo-Dutch super-major reported adjusted income of $540 million, 64% lower than the year-ago period. The unfavorable comparison was due to coronavirus-hit sales volumes (down 26% year over year), lower refining margins and a dip in trading contributions. Meanwhile, refinery utilization came in at 72%, down 6% from the December quarter of 2019.

Integrated Gas: The unit reported adjusted income of $1.1 billion, down 44% from the $2 billion in the October-December quarter of 2019. Results were primarily impacted by lower commodity prices and a decrease in trading contributions, partly offset by lower operating expenses. Meanwhile, the total Integrated Gas production edged down 1% year over year to 942 MBOE/d. On a further bearish note, LNG liquefaction volumes decreased 11% from the fourth quarter of 2019 to 8.21 million tons.

Chemicals: The segment recorded a profit of $381 million (excluding items) during the quarter, turning around from the year-ago loss of $65 million on the back of higher realized margins in base chemicals and intermediates.

Financial Performance

As of Dec 31, 2020, the Zacks Rank #1 (Strong Buy) company, which trimmed its payout for the first time since World War II in April last year, had $31.8 billion in cash and $108 billion in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 32.2%, up from 29.3% a year ago.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

During the quarter under review, Shell generated cash flow from operations of $6.3 billion, returned $1.3 billion to its shareholders through dividends and spent $5.2 billion cash on capital projects.

The company’s cash flow from operations fell 39% from the year-earlier level. Meanwhile, the group raked in $882 million in free cash flow during the fourth quarter, slumping from $5.4 billion a year ago.


Shell expects first-quarter 2021upstream volumes of 2,400-2,600 MBOE/d, while Integrated Gas production is expected between 900 MBOE/d and 950 MBOE/d. The company also sees Oil Products sales volumes of 4,000-5,000 thousand barrels per day, Chemicals sales volumes of 3,600-3,900 thousand tons and refinery utilization in the range of 73-81%.

Fourth-Quarter Results of Other Oil Supermajors

Shell joins continental rival BP plc (BP - Free Report) and U.S. supermajor Chevron (CVX - Free Report) in reporting an earnings miss. Meanwhile, ExxonMobil (XOM - Free Report) came up with better-than-expected fourth-quarter earnings earlier this week.

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