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Royal Dutch Shell's (RDS.A) Q4 Earnings Hit by Refining Woes
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Europe’s largest oil company Royal Dutch Shell plc reported weaker-than-expected fourth-quarter results, as profits in its downstream business slipped on depressed refining margins.
The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items) of 44 cents, below the Zacks Consensus Estimate of 72 cents and the year-ago adjusted profit of 50 cents.
Revenues of $64,767 million missed the Zacks Consensus Estimate of $68,600 million but were up 11% year over year amid higher oil prices and production.
Royal Dutch Shell PLC Price, Consensus and EPS Surprise
Upstream: Upstream segment recorded an income of $54 million (excluding items) during the quarter, turning around from the $1,009 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, improved oil realizations, reduced costs and better operational performance. To some extent, these were offset by depreciation charges associated with the BG takeover and higher taxation.
Shell’s upstream volumes averaged 2,997 thousand oil-equivalent barrels per day (MBOE/d), 25% higher than the year-ago period. While crude oil production increased 30%, natural gas output was up 17% - thanks to the contribution from BG Group that was acquired last year. Liquids contributed approximately 58% 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 Kashagan in Kazakhstan, the Corrib gas field in Ireland and Sabah Gas Kebabangan in Malaysia – that boosted output by roughly 109 MBOE/d and more than offset the impact of field declines.
Shell’s worldwide realized liquids prices were 15% above the year-earlier levels but natural gas prices were down 5%.
Downstream: In the Downstream segment, the Anglo-Dutch super-major reported adjusted income of $1,339 million, 12% less than the $1,524 million earned in the year-ago period. The negative comparison reflects the impact of weaker results from refining operations and higher taxation, partly offset by lower operating costs.
Integrated Gas: The Integrated Gas unit reported adjusted income of $907 million against $1,245 million in October-December quarter of 2015. Results were adversely affected by higher BG-related expenses, lower LNG prices and increased taxation. Partly offsetting these factors were higher output (on contribution from BG assets), increase in oil prices and the start-up of Gorgon LNG project in Australia.
Cash Flow
During the quarter under review, Shell generated cash flow from operations of $9,170 million, returned $3,800 million to shareholders through dividends and spent $6,900 million on capital projects.
Balance Sheet
As of Dec 31, 2016, this Zacks Rank #3 (Hold) company had $19,130 million in cash and $92,476 million in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 28.0%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Share Performance
Shares have risen 7% over the past 3 months, mirroring the Zacks categorized Oil & Gas - International Integrated industry's gains. Over the last 12 months, Royal Dutch Shell stock has risen 26%.
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Royal Dutch Shell's (RDS.A) Q4 Earnings Hit by Refining Woes
Europe’s largest oil company Royal Dutch Shell plc reported weaker-than-expected fourth-quarter results, as profits in its downstream business slipped on depressed refining margins.
Shell follows U.S. peer Chevron Corp. (CVX - Free Report) in announcing earnings well short of estimates. Meanwhile, ExxonMobil Corp. (XOM - Free Report) – the world's largest publicly traded oil producer – posted a better-than-expected quarterly profit earlier in the week helped by increased liquids realizations. Another European oil major BP plc (BP - Free Report) is scheduled to come out with fourth quarter numbers next week.
The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items) of 44 cents, below the Zacks Consensus Estimate of 72 cents and the year-ago adjusted profit of 50 cents.
Revenues of $64,767 million missed the Zacks Consensus Estimate of $68,600 million but were up 11% year over year amid higher oil prices and production.
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: Upstream segment recorded an income of $54 million (excluding items) during the quarter, turning around from the $1,009 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, improved oil realizations, reduced costs and better operational performance. To some extent, these were offset by depreciation charges associated with the BG takeover and higher taxation.
Shell’s upstream volumes averaged 2,997 thousand oil-equivalent barrels per day (MBOE/d), 25% higher than the year-ago period. While crude oil production increased 30%, natural gas output was up 17% - thanks to the contribution from BG Group that was acquired last year. Liquids contributed approximately 58% 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 Kashagan in Kazakhstan, the Corrib gas field in Ireland and Sabah Gas Kebabangan in Malaysia – that boosted output by roughly 109 MBOE/d and more than offset the impact of field declines.
Shell’s worldwide realized liquids prices were 15% above the year-earlier levels but natural gas prices were down 5%.
Downstream: In the Downstream segment, the Anglo-Dutch super-major reported adjusted income of $1,339 million, 12% less than the $1,524 million earned in the year-ago period. The negative comparison reflects the impact of weaker results from refining operations and higher taxation, partly offset by lower operating costs.
Integrated Gas: The Integrated Gas unit reported adjusted income of $907 million against $1,245 million in October-December quarter of 2015. Results were adversely affected by higher BG-related expenses, lower LNG prices and increased taxation. Partly offsetting these factors were higher output (on contribution from BG assets), increase in oil prices and the start-up of Gorgon LNG project in Australia.
Cash Flow
During the quarter under review, Shell generated cash flow from operations of $9,170 million, returned $3,800 million to shareholders through dividends and spent $6,900 million on capital projects.
Balance Sheet
As of Dec 31, 2016, this Zacks Rank #3 (Hold) company had $19,130 million in cash and $92,476 million in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 28.0%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Share Performance
Shares have risen 7% over the past 3 months, mirroring the Zacks categorized Oil & Gas - International Integrated industry's gains. Over the last 12 months, Royal Dutch Shell stock has risen 26%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>