Shell PLC (LSE:SHEL, NYSE:SHEL) shares were one of the highest FTSE 100 risers on Friday as analysts said the company had "smashed" expectations for the first quarter.
Adjusted earnings of $5.6 billion compared to consensus forecasts of $5.00 billion, with $11.9 billion of underlying cash flow from operations allowing it to easily maintain a quarterly buyback at $3.5 billion and hold the dividend steady at $0.358 per share.
Net debt rose 7% on the quarter to $41.5 billion, which was in line with forecasts, with gearing increasing to 18.7%.
Analyst Mark Crouch at eToro said: “Shell smashed analysts’ expectations by over $1bn in Q1 as strict capital discipline, a hallmark of Shell, continues to drive strong shareholder returns and insulate the business from market shocks.”
UBS analysts highlighted that the result was supported by a 7% quarter-on-quarter drop in operating expenses and lower exploration write-offs.
The Swiss bank said Shell’s integrated gas division performed strongly, aided by a strategic pivot made more than a decade ago. LNG volumes for the second quarter are expected to come in below UBS estimates due to scheduled maintenance.
While analysts also pointed to investor concerns over the lower level of reported cash flow and the rise in net debt, analysts at AJ Bell noted that Shell had a big advantage from its stronger relative performance compared to Footsie rival BP.
“This trend of being flattered by comparison with its London-listed counterpart continued with first quarter results… Shell which pivoted towards natural gas more than a decade ago continues to see benefits from this strategy.
“Shell has the advantage at the moment that, for any of the difficulties it faces it can just point its finger down the road at BP and say, ‘at least we’re not as bad as that’.”
Saxo analysts noted that a slight recovery in oil prices on Friday also lifted the mood, after crude sank to four-year lows.
Oil prices were lifted by China openness to US trade talks and US President Trump threatened Iran with fresh sanctions.
Shell was described as "super-resilient" by Saxo.
“It’s keeping up the pace of its buyback programme despite the weaker crude outlook,” they added, with the moves taking Shell shares back to flat for the year, “and we await to see whether peak-bearishness about oil prices is past us, which could ignite some action in the shares”.