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Europe’s largest oil company Royal Dutch Shell plc reported first-quarter earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of 74 cents, above the Zacks Consensus Estimate of 51 cents on higher LNG sales volumes.
However, the bottom line compared unfavorably with the year-ago profit of $1.30. The underperformance mainly stemmed from lower oil and gas prices.
The Hague-based Shell reported revenues of $61 billion, which were 29% below the first-quarter 2019 sales of $85.7 billion.
Meanwhile, the company cut its dividend by 66%, and said it would suspend the next installment of its stock repurchase program. Forced by the historic oil market crash and the coronavirus-induced demand destruction for the fuel, Shell trimmed its payout for the first time since World War II, in the process becoming the second oil major after Equinor (EQNR - Free Report) to do so. While another European peer BP plc stuck to its dividend for now, there is a lot of speculation as to what is to come from the likes of U.S. biggies ExxonMobil (XOM - Free Report) and Chevron (CVX - Free Report) .
Royal Dutch Shell PLC Price, Consensus and EPS Surprise
Upstream: Upstream segment recorded a profit of $291 million (excluding items) during the quarter, down 82% from the $1.6 billion (adjusted) achieved in the year-ago period. This primarily reflects the impact of drop in production, plus lower oil and gas prices.
Shell’s upstream volumes averaged 2,710 thousand oil-equivalent barrels per day/MBOE/d (64% liquids), down 5% from the year-ago period due to asset sales, normal field declines and lower joint venture production. Liquids production totaled 1,730 thousand barrels per day (up 4% year over year), while natural gas output came in at 5,680 million standard cubic feet per day (down 17%).
At $46.53 per barrel, the group’s worldwide realized liquids prices were 19% below the year-earlier levels while natural gas prices were down 20%.
Oil Products: In the Oil Products segment, the Anglo-Dutch super-major reported adjusted income of $1.4 billion, 6% less than the year-ago period. The negative comparison was due to decline in sales volumes (down 18% year over year) and lower refining margins. Meanwhile, refinery utilization came in at 81%, up 2% from the March quarter of 2019.
Integrated Gas: The Integrated Gas unit reported adjusted income of $2.1 billion, down 17% from the $2.6 billion in January-March quarter of 2019. Results were primarily impacted by lower commodity prices and decline in trading contribution. Meanwhile, the total Integrated Gas production increased by 12% year over year to 955 MBOE/d. On a further positive note, LNG liquefaction volumes were up 2% from the first quarter of 2019 to 8.88 million tons.
Chemicals: In the Chemicals segment, the company recorded a profit of $148 million (excluding items) during the quarter, down 67% from the $451 million (adjusted) achieved in the year-ago period. The negative comparison was due to decreasing volumes, lower margins and higher operating expenses.
Financial Performance
As of Mar 31, 2020, the Zacks Rank #3 (Hold) company had $21.8 billion in cash and $95.1 billion in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 28.9%, up from 26.5% a year ago.
During the quarter under review, Shell generated cash flow from operations of $14.9 billion, returned $3.5 billion to shareholders through dividends and spent $5 billion cash on capital projects.
The company’s cash flow from operations surged 72% from the year-earlier level. Meanwhile, the group raked in $12.1 billion in free cash flow during the first quarter, jumping from $4 billion a year ago. Moreover, it was more than enough to take care of its $1 billion in share buybacks and its $3.5 billion dividend.
Guidance
Shell expects second quarter 2020 upstream volumes to be 1,750 - 2,250 MBOE/d, while Integrated Gas production is expected to be between 840 MBOE/d and 890 MBOE/d.
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Shell (RDS.A) Tops Q1 Earnings, Cuts Dividend Amid Oil Rout
Europe’s largest oil company Royal Dutch Shell plc reported first-quarter earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure) of 74 cents, above the Zacks Consensus Estimate of 51 cents on higher LNG sales volumes.
However, the bottom line compared unfavorably with the year-ago profit of $1.30. The underperformance mainly stemmed from lower oil and gas prices.
The Hague-based Shell reported revenues of $61 billion, which were 29% below the first-quarter 2019 sales of $85.7 billion.
Meanwhile, the company cut its dividend by 66%, and said it would suspend the next installment of its stock repurchase program. Forced by the historic oil market crash and the coronavirus-induced demand destruction for the fuel, Shell trimmed its payout for the first time since World War II, in the process becoming the second oil major after Equinor (EQNR - Free Report) to do so. While another European peer BP plc stuck to its dividend for now, there is a lot of speculation as to what is to come from the likes of U.S. biggies ExxonMobil (XOM - Free Report) and Chevron (CVX - Free Report) .
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: Upstream segment recorded a profit of $291 million (excluding items) during the quarter, down 82% from the $1.6 billion (adjusted) achieved in the year-ago period. This primarily reflects the impact of drop in production, plus lower oil and gas prices.
Shell’s upstream volumes averaged 2,710 thousand oil-equivalent barrels per day/MBOE/d (64% liquids), down 5% from the year-ago period due to asset sales, normal field declines and lower joint venture production. Liquids production totaled 1,730 thousand barrels per day (up 4% year over year), while natural gas output came in at 5,680 million standard cubic feet per day (down 17%).
At $46.53 per barrel, the group’s worldwide realized liquids prices were 19% below the year-earlier levels while natural gas prices were down 20%.
Oil Products: In the Oil Products segment, the Anglo-Dutch super-major reported adjusted income of $1.4 billion, 6% less than the year-ago period. The negative comparison was due to decline in sales volumes (down 18% year over year) and lower refining margins. Meanwhile, refinery utilization came in at 81%, up 2% from the March quarter of 2019.
Integrated Gas: The Integrated Gas unit reported adjusted income of $2.1 billion, down 17% from the $2.6 billion in January-March quarter of 2019. Results were primarily impacted by lower commodity prices and decline in trading contribution. Meanwhile, the total Integrated Gas production increased by 12% year over year to 955 MBOE/d. On a further positive note, LNG liquefaction volumes were up 2% from the first quarter of 2019 to 8.88 million tons.
Chemicals: In the Chemicals segment, the company recorded a profit of $148 million (excluding items) during the quarter, down 67% from the $451 million (adjusted) achieved in the year-ago period. The negative comparison was due to decreasing volumes, lower margins and higher operating expenses.
Financial Performance
As of Mar 31, 2020, the Zacks Rank #3 (Hold) company had $21.8 billion in cash and $95.1 billion in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 28.9%, up from 26.5% 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 $14.9 billion, returned $3.5 billion to shareholders through dividends and spent $5 billion cash on capital projects.
The company’s cash flow from operations surged 72% from the year-earlier level. Meanwhile, the group raked in $12.1 billion in free cash flow during the first quarter, jumping from $4 billion a year ago. Moreover, it was more than enough to take care of its $1 billion in share buybacks and its $3.5 billion dividend.
Guidance
Shell expects second quarter 2020 upstream volumes to be 1,750 - 2,250 MBOE/d, while Integrated Gas production is expected to be between 840 MBOE/d and 890 MBOE/d.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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