Royal Dutch Shell Plc (LON:RDSB) shares traded positively on Thursday after the oil supermajor’s first half financials showed momentum has returned to its business.
Better oil prices and the impact of the BG acquisition helping the supermajor to a 206% improvement in income (attributable to shareholders).
The income figure improved to US$5.08bn for the first half of 2017, up from US$1.6bn in the comparable period of 2016.
CCS earnings, the key financial metric followed by the market, meanwhile, rose 403% to US$5.3bn for the six months compared to just over US$1bn a year ago.
Cash flow also improved dramatically, up more than 600% with Shell banking US$20.7bn from operations in the first half.
In London, Shell shares were up 10p or 0.5% trading at £21.07 each.
Shell is heading in the right direction
Nicholas Hyett, analyst at stockbroker Hargreaves Lansdown, in a note, said: “There’s a lot to like in Shell’s results, with all the major metrics heading in the right direction.
“The strong free cash flow performance is particularly eye-catching, covering the cash portion of the dividend and raising the possibility that the scrip dividend could be scrapped this year.
“Achieving these results at an oil price which is still sub $50 a barrel, while also carrying out and integrating an major acquisition is undeniably impressive. Although admittedly, more of the profit is coming from the downstream business rather than actually pumping oil.”
Second quarter
Isolating the most recent three month period, Shell reported CCS earnings of US$3.6bn for the second quarter and it highlighted higher contributions from its downstream business, citing improved operating performance and better conditions for its chemicals and refining businesses.
Cash flow from operations amounted to US$11.3bn in the second quarter, and the oil firm noted a US$2.3bn boost to capital.
Shell paid US$3.9bn to shareholders via dividends in the second quarter, with US$900mln of that paid in shares. The half year dividend has been announced at 47 cents per share.
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Shell boss Ben van Beurden, in a statement, said: “Shell’s strong results this quarter show that we are reshaping the company following the integration of BG.
“Cash generation has been resilient over four consecutive quarters, at an average oil price of just under US$50 per barrel.
“This quarter, we generated robust earnings excluding identified items of US$3.6bn, while over the past 12 months cash flow from operations of US$38bn has covered our cash dividend and reduced gearing to 25%.”
The chief executive added that Shell will continue to show be “very disciplined” as it continues to respond to the external oil price environment and energy sector developments.
Van Beurden said Shell will have an “absolute focus” on the four levers it can control – namely capital efficiency, costs, new project delivery, and divestments.
“I am confident that we are on track to deliver a world-class investment to our shareholders,” he said.