Shell's profit surges as oil sector rebounds

Royal Dutch Shell's profits surged in the first three months of the year on the back of rising oil prices. (AFP)
Updated 04 May 2017
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Shell's profit surges as oil sector rebounds

LONDON: Royal Dutch Shell said net profit more than doubled in the first quarter, joining its peers in beating analyst forecasts as rebounding oil prices and refining margins lifted revenue after a near three-year downturn.
A 55 percent rise in oil prices from a year ago and deep cost cuts boosted cash generation, enabling the Anglo-Dutch company to cover spending and dividend payouts, while reducing debt following its $54 billion acquisition of BG Group last year.
Shell remains on track to hit its $30 billion asset disposal programme by 2018 to finance the BG acquisition, selling around $20 billion since 2016, including a large portfolio in the North Sea and exiting Canada's oil sands.
"This is now the third consecutive quarter of dividend coverage, which coupled with the divestments to be cashed in later in the year, suggests Shell is shaping up to have a much better performance this year," RBC Capital Markets analyst Biraj Borkhataria said in a note after the results on Thursday.
Europe's largest oil and gas company joined rivals BP , Exxon Mobil, Chevron and Total in beating analysts' quarterly profit forecasts.
It generated a cash flow of $9.5 billion in the quarter, up 13 fold from a year earlier, and the strongest among its peers. Free cash flow rose to $5.2 billion from a negative $16.26 billion a year earlier.
Shell's shares, rose 2.6 percent at the market open, outperforming a 0.5 percent gain in London's FTSE 100 index .
Net income attributable to shareholders in the quarter, based on a current cost of supplies (CCS) and excluding exceptional items rose 142 percent to $3.75 billion, compared with a company-provided analysts' consensus of $3.05 billion.
A year ago, net income attributable to shareholders was $1.55 billion.
"We saw notable improvements in Upstream and Chemicals, which benefited from improved operational performance and better market conditions," said Chief Executive Ben van Beurden.
Oil and gas production, known as upstream, rose 2 percent in the quarter to 3.752 million barrels of oil equivalent from 3.905 million boed in the fourth quarter of 2016 as a number of new fields continued to ramp up in Brazil and Kazakhstan in particular.
Refining and marketing earnings also rose 20 percent to $2.49 billion.
Refined oil products sales are expected to decrease by 200,000 barrels per day (bpd) in the second quarter of 2017 following the sale of refineries in Malaysia and Denmark and the splitting of the Motiva Enterprises joint venture with Saudi Aramco in the United States, the company said.
Shell's debt ratio versus company capitalisation, known as gearing, declined in the first quarter to 27.2 percent from 28 percent in the fourth quarter.
The company stuck to plans to invest $25 billion this year, at the lower end of the long-term target.


India names Modi demonetization backer as cenbank head

Visitors are seen standing next to a logo of the Reserve Bank of India (RBI) at the bank's head office in Mumbai on December 5, 2018. (AFP)
Updated 12 December 2018
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India names Modi demonetization backer as cenbank head

  • Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization

MUMBAI: Ex-finance ministry official Shaktikanta Das took charge of the Reserve Bank of India on Tuesday, in a swift appointment expected to ease a dispute with the government as it pushes for looser credit rules ahead of a general election.
The announcement by Prime Minister Narendra Modi’s administration came just a day after Urjit Patel resigned from the post, following months of clashes between the two institutions over lending curbs and how to deploy the central bank’s surplus reserves.
Pressure on the RBI to take immediate steps to boost the economy, including a transfer of the excess reserves to the government, could well rise after Modi’s ruling Bharatiya Janata Party (BJP) suffered likely election losses in three key states on Tuesday.
Das — a high-profile backer of Modi’s controversial 2016 move to scrap high-value currency notes, known as demonetization — will serve a three-year term as governor, effective immediately.
RBI watchers said they expected the 61-year-old, who retired last year as secretary of the department of economic affairs having previously served on the RBI’s board, to put relations between the Mumbai-based bank and the finance ministry in New Delhi on a stabler footing.
Investors will also look closely at his ability to hold up against outside influences after recent efforts by the Modi government to gain greater control over the central bank’s regulatory powers.
“The incoming governor will have to work hard to prove that he has his own independent mind,” said Deepak Jasani, head of retail research at Hdfc Securities.
Investors said any openly political appointee with little macro-economic experience, would not sit well with financial markets that already sold off following the BJP’s election setbacks.
But Ashish Vaidya, executive director and head of trading at DBS Bank in Mumbai, said he expected India’s debt and currency markets to react positively.
“He is a bureaucrat...We expect the RBI to take a pragmatic approach under him, be pro-growth and change its stance going ahead given that inflation has come off sharply,” he said.
Finance Minister Arun Jaitley told Reuters partner ANI that the government acknowledged the bank’s independence.
“Government will fully support the RBI and coordinate with it in areas where consultations of government are required to make sure India’s economy benefits from both government policy decisions and areas which fall within domain of the RBI,” ANI tweeted, quoting Jaitley.

SWIFT APPOINTMENT
Pronab Sen, India’s former chief statistician, said he was surprised by the speed of Das’s appointment.
“If you have a situation where a position as important as the governor of the RBI is filled within 24 hours of the resignation of the incumbent, that will raise eyebrows,” Sen told Reuters.
“People are going to say, clearly this guy had already been identified. And, the situation was created where Urjit Patel had to quit.”
Das — widely seen as a contender for the top RBI job after Raghuram Rajan’s term ended in 2016 — did not answer calls from Reuters to his mobile phone.
RBI officials who have worked with him closely said Das was likely to be more inclusive in the decision-making process than Patel.
“He has a balanced approach and is good at consensus building,” said a former deputy governor. .”..We have had our fair share of differences. But he has always been solution-centric rather than festering on those differences.”
Das worked in the finance ministry under both Modi’s government and the previous coalition led by the main opposition Congress party and was also involved in drafting the Insolvency and Bankruptcy code aimed at protecting small investors.
He came under fire for his pro-demonetization stance and was the most vocal bureaucrat at the time Modi withdrew the high-value bank notes to fight tax evasion.
Das last year criticized the methodology of global rating agencies and sought a sovereign rating upgrade for India.