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Shell (RDS.A) Q1 Earnings Beat on Higher Commodity Prices

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Europe’s largest oil company Royal Dutch Shell plc (RDS.A - Free Report) reported first-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of 82 cents. The bottom line came in ahead of the Zacks Consensus Estimate of 79 cents and improved from the year-ago profit of 74 cents per ADS.

The outperformance was mainly backed by stronger commodity prices and robust chemical margins.

However, the Hague-based Shell reported revenues of $59.1 billion, which were 3% below first-quarter 2020 sales of $61 billion on lower production and oil products sales volumes.

As per its February announcement, Royal Dutch Shell boosted its quarterly dividend by about 4% to 17.35 cents per share.

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 recorded a profit of $963 million (excluding items) during the quarter, surging from $291 million (adjusted) achieved in the year-ago period. This primarily reflects the impact of higher oil and gas prices.

At $55.17 per barrel, the group’s worldwide realized liquids prices were 17.7% above the year-earlier levels while natural gas prices were up 12.7%.

Shell’s upstream volumes averaged 2,462 thousand oil-equivalent barrels per day (MBOE/d), down 9.2% from the year-ago period due to maintenance activities and asset sales. Liquids production totaled 1,579 thousand barrels per day (down 8.7% year over year), while natural gas output came in at 5,126 million standard cubic feet per day (down 9.8%).

Oil Products: In this segment, the Anglo-Dutch super-major reported adjusted income of $877 million, 35.7% lower than the year-ago period. The unfavorable comparison was due to coronavirus-hit sales volumes (down 21.1% year over year) and lower refining margins. Meanwhile, refinery utilization came in at 72%, down 9% from the March quarter of 2020.

Integrated Gas: The unit reported adjusted income of $1.4 billion, down 34% from the $2.1 billion in the January-March quarter of 2020. Results were primarily impacted by higher operating expenses, decrease in marketing and trading contributions, and favorable deferred tax movements in the year-ago period. On a further bearish note, LNG liquefaction volumes decreased 8.1% from the first quarter of 2020 to 8.16 million tons. Meanwhile, the total Integrated Gas production edged up 1.3% year over year to 967 MBOE/d.

Chemicals: The segment recorded a profit of $730 million (excluding items) during the quarter, soaring from the year-ago earnings of $148 million on the back of higher realized margins in base chemicals and intermediates, to go with a robust price environment.


Financial Performance

As of Mar 31, 2021, 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 billion in cash and $102.4 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 29.9%, up from 28.9% a year ago.

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

During the quarter under review, Shell generated cash flow from operations of $8.3 billion, returned $1.3 billion to its shareholders through dividends and spent $3.9 billion cash on capital projects.

The company’s cash flow from operations fell 44.2% from the year-earlier level. Meanwhile, the group raked in $7.7 billion in free cash flow during the first quarter, down from $12.1 billion a year ago.


Shell expects second-quarter 2021 upstream volumes of 2,150-2,350 MBOE/d, while Integrated Gas production is expected between 880 MBOE/d and 940 MBOE/d. The company also foresees Oil Products sales volumes of 4,000-5,000 thousand barrels per day, Chemicals sales volumes of 3,500-3,800 thousand tons and refinery utilization in the range of 73-81%.

Earnings Schedules of Other Oil Supermajors

Among the big integrated players, ExxonMobil (XOM - Free Report) and Chevron (CVX - Free Report) are scheduled to release tomorrow, while continental rival BP plc (BP - Free Report) came up with better-than-expected bottom line numbers earlier this week.

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