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Royal Dutch Shell slips on lukewarm reaction to third-quarter earnings jump

The FTSE 100-listed company said third-quarter earnings attributable to shareholders - based on a current cost of supplies and excluding identified items - rose by 37% to US$5.624bln

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Shell also said it will launch the second tranche of its US$25bn share buyback programme, which it plans to complete by the end of 2020

Royal Dutch Shell PLC  (LON:RDSA) shares slipped on Thursday after the oil giant's 37% jump in third-quarter profit, boosted by stronger crude prices proved to be slightly less than expected, and a retreat in oil prices raised some worries about future growth.

The FTSE 100-listed company said third-quarter earnings attributable to shareholders - based on a current cost of supplies and excluding identified items - came in at US$5.624bln, up from US$4.103bln a year earlier.

READ: Royal Dutch Shell should be preferred over BP, says Deutsche Bank

Shell said its earnings growth during the period was driven in part from increased realised oil, gas and LNG prices and higher contributions from trading in Integrated Gas. 

The group's income attributable to shareholders was US$5.84bln in the third-quarter, versus US$4.09bln a year earlier, while cash flow from operating activities jumped by 59% to US$12.09bln from US$7.58bln a year earlier.

Excluding working capital movements, cash flow from operations was US$14.7bn, which mainly reflected increased earnings and higher dividends received, the firm added.

Ben van Beurden, Shell's chief executive, commented: “Good operational delivery across all Shell businesses produced one of our strongest-ever quarters, with cash flow from operations of $14.7 billion, excluding working capital movements. Our strong financial performance allowed us to cover the cash dividend, interest payments, share buybacks and to further pay down debt.”

Shell also said it will launch the second tranche of its US$25bn share buyback programme, which it plans to complete by the end of 2020. The second tranche of buying will run through January 28, 2019. The first tranche of purchases was completed in October.

Lukewarm reaction

In morning trading, Shell A shares were 2.1% lower at 2,449p.

Russ Mould, investment director at AJ Bell said: “Today’s reaction to a 37% increase in third-quarter profit from Royal Dutch Shell offers a reminder that oil and gas companies, no matter how well they are performing, are still at the mercy of fluctuations in oil prices.”

He added: “Markets are forward-looking, and Shell’s results were delivered against the backdrop of oil trading at multi-year highs. This may not be the case in the final part of the year. Combined with the negative impact of the falling oil price there are other factors which may explain the lukewarm reaction to the update.”

READ: BP doubles quarterly profits more than forecast as crude prices and production rise

Mould continued: “Unlike BP, which delivered better than expected numbers earlier this week, earnings are slightly short of consensus expectations.

“There might also be some disappointment at the lack of an increase in the dividend despite cash flow from operations of nearly $15bn.”

 -- Adds share price, analyst comment --

Quick facts: Royal Dutch Shell

Price: 2293.5 GBX

AIM:RDSA
Market: AIM
Market Cap: £1.82 billion
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