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
0

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.


German industry groups warn US on tariffs before Trump-Juncker meeting

Updated 22 July 2018
0

German industry groups warn US on tariffs before Trump-Juncker meeting

  • Washington imposed tariffs on steel and aluminum imports from the EU, Canada and Mexico on June 1
  • Trump is threatening to extend them to EU cars and car parts

BERLIN: German industry groups warned on Sunday, before European Commission President Jean-Claude Juncker meets US President Donald Trump this week, that tariffs the United States has imposed or is threatening to introduce risk harming America itself.
Citing national security grounds, Washington imposed tariffs on steel and aluminum imports from the EU, Canada and Mexico on June 1 and Trump is threatening to extend them to EU cars and car parts. Juncker will discuss trade with Trump at a meeting on Wednesday.
“The tariffs under the guise of national security should be abolished,” Dieter Kempf, head of Germany’s BDI industry association said. Juncker should tell Trump that the United States would harm itself with tariffs on cars and car parts, he told Welt am Sonntag newspaper.
The German auto industry employed more than 118,000 people in the United States and 60 percent of what they produced was exported. “Europe should not let itself be blackmailed and should put in a confident appearance in the United States,” he added.
German Economy Minister Peter Altmaier told Deutschlandfunk radio on Sunday he hoped it was still possible to find a solution that was attractive to both sides. “For us, that means we stand by open markets and low tariffs,” he said
He said the possibility of US tariffs on EU cars was very serious and stressed that reductions in international tariffs in the last 40 years and the opening of markets had resulted in major benefits for citizens.
EU officials have tried to lower expectations about what Juncker can achieve, and played down suggestions that he will arrive in Washington with a novel plan to restore good relations.
Altmaier said it was difficult to estimate the impact of any US car tariffs on the German economy, but added: “Tariffs on aluminum and steel had a volume of just over six billion euros. In this case we would be talking about almost ten times that.”
He said he hoped job losses could be avoided but noted that trade between Europe and the United States made up around one third of total global trade.
“You can imagine that if we go down with a cold in the German-American or European-American relationship, many others around us will get pneumonia so it’s highly risky and that’s why we need to end this conflict as quickly as possible.”
Eric Schweitzer, president of the DIHK Chambers of Commerce, told Welt am Sonntag the German economy had for decades counted on open markets and a reliable global trading system but added: “Every day German companies feel the transatlantic rift getting wider.”