Shell records best-ever earnings for fifth consecutive quarter

The Royal Dutch/Shell Group Thursday reported record earnings for the fifth quarter in a row. The group's adjusted earnings were nearly $3.9 billion, 23% higher than those of a year ago, on the back of higher gas prices, higher refining margins, and increased liquefied natural gas volumes.


Darius V. Snieckus
OGJ Online

LONDON, May 3 -- The Royal Dutch/Shell Group continued its record-setting ways Thursday with outgoing Chairman Mark Moody-Stuart reporting that the Anglo-Dutch energy group had chalked up best-ever earnings for the fifth quarter in a row.

The group's adjusted "current cost of supplies" (CCS) earnings were nearly $3.9 billion, 23% higher than those of a year ago. Moody-Stuart credited "higher gas prices, higher refining margins, and increased liquefied natural gas volumes," for the record figure. He noted that reported net income for the quarter -- $3.89 billion -- was also a record.

Return on average capital employed on a CCS earnings basis for the 12 months to Mar. 31 was 20.7% compared with 14% a year ago, the Shell chairman emphasized.

Shell's E&P division turned in record earnings of $2.85 billion, up 21% on the same period last year, on the back of "higher gas realizations." The company's hydrocarbon production climbed by 3% last quarter.

The Downstream Gas & Power division's earnings nearly tripled year-on-year to $355 million, while Oil Products recorded a 62% rise in earnings of $958 million. Moody-Stuart said the single black mark was the fact that chemicals revenues dropped 83% to $53 million "due to lower margins in almost all businesses."

Capital investment rose to $2.3 billion in the quarter, up $1.4 billion from the corresponding period last year, largely due to the takeover of Fletcher Challenge Energy Ltd., which contributed $1 billion.

"We have come a long way over the last few years," said Moody-Stuart. "Throughout this period we have continued to search for new opportunities for profitable growth, some of which you have seen come to fruition in the last few months. We will continue to seek out opportunities that fit into our portfolio and move on them if appropriate.

"What we will not do," he added, "is pursue targets purely in the interests of making a deal, nor will we lose sight of the underlying economics of our business."

Moody-Stuart acknowledged he was disappointed by the failure of Shell's proposed merger with Australia's Woodside Petroleum Ltd. But he pointed to the acquisition of Fletcher and the 14% stake bought recently in the China National Offshore Oil Corp., along with deals "in the pipeline" -- a joint venture with Germany's RWE-DEA AG, and the possible acquisition of Rocky Mountain gas producer Barrett Resources Corp. -- as reasons for cheer.

"It is a 'some you win, some you lose' world," he noted.

Analysts Lehman Brothers said, "Shell's business mix, featuring low exposure to US gas and global oil production and a high exposure to Asian downstream has disadvantaged it this quarter. It has also been hit by the atrocious performance of its US downstream. Both these issues highlight the drive to make acquisitions.

"However, the underlying business performance continues to exceed expectations," the analysts added.

Meanwhile, the two Shell parent companies -- Royal Dutch and Shell Transport -- began their respective share buyback programs that stockholders had approved last year. In the first quarter, shares totaling some $1.4 billion were purchased under this program.

Contact Darius V. Snieckus at dsnieckus@ogjonline.com

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