Gas fuels earnings above highest estimates at Shell
ROYAL Dutch Shell's earnings for the first quarter beat even the highest analyst estimate as its natural gas business led a strong firm-wide performance.
Shell had a good ending to an otherwise mixed Big Oil earnings season, which showed companies mostly recovering from a worst-in-a-generation downturn but unable to fully insulate themselves against volatile markets.
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While BP, Chevron and Total mostly hit their earnings targets on a mixture of rising output and cost cuts, Exxon Mobil suffered a "shocker" due to its worst refining performance in nearly 20 years.
"Shell has made a strong start to 2019," CEO Ben Van Beurden said yesterday. "The consistent financial performance across all our businesses provides confidence in meeting our 2020 outlook."
The Anglo-Dutch company said adjusted net income was $5.3bn (€4.7bn) in the first quarter, well ahead of the average analyst estimate of $4.52bn. That's 2pc down from a year earlier, reflecting weaker refining margins and lower crude prices.
Shell is far more focused on natural gas than its peers, accounting for about 25pc of all the world's traded liquefied natural gas volumes annually.
The unit's profit of $2.57bn was 24pc higher than analysts' estimates, the largest outperformance of any unit.
Cash flow from operations, excluding working capital movements and the effect of accounting-rule changes, rose to $11.3bn from $10.4bn a year earlier. Total oil and gas output decreased 2pct to 3.752m barrels of oil equivalent a day.
In the quarter, Shell started up the production vessel offshore Brazil called Lula North and shipped some of its first cargoes from the Prelude LNG project in Australia.
Shell replaced only half its reserves last year, prompting questions about whether the company will use acquisitions to bulk up its portfolio.
In January, Mr Van Beurden said the company's portfolio in the prolific Permian shale basin was "a bit small", leading to speculation about an acquisition there.
Despite talks with Endeavor Energy Resources earlier this year, Shell so far hasn't jumped into the region's growing deals frenzy that culminated recently in the fight between Chevron and Occidental Petroleum over Anadarko Petroleum.
Investors are also keeping a close eye on details of share buybacks. Shell is now in the third tranche of its planned repurchase of $25bn of stock before 2021. It has bought back $6.75bn of shares so far, and will repurchase as much as $2.75bn more by July 29.