Royal Dutch Shell (NYSE: RDS.A), one of the last supermajors to report Q1 earnings, was the one that stood out among the crowd with better-than-expected results, as its trading and natural gas businesses offset weak oil prices and depressed refining margins that plagued the other majors this earnings season.
Shell reported on Thursday earnings on a current cost of supplies (CCS) basis—its closest metric to a net profit closely watched by analysts—of US$5.3 billion in the first quarter this year, down by 2 percent annually, but beating by a lot the consensus forecast of US$4.5 billion.
While Shell’s profits were hit by lower chemicals and refining margins and lower realized oil prices—the factors that weighed on all supermajors in Q1—the Anglo-Dutch group reported stronger contributions from its trading division and higher realized liquefied natural gas (LNG) and gas prices compared to the first quarter of 2018.
Yet, Shell’s cash flow from operating activities fell by 9 percent to US$8.630 billion, while free cash flow dropped to US$4 billion in Q1 2019 from US$5.178 billion in Q1 2018.
“Shell has made a strong start to 2019, with the first quarter financial performance demonstrating the strength of our strategy and the quality of our portfolio of assets,” chief executive Ben van Beurden said, commenting on the Q1 results.
In a sign of confidence in the direction of its business, Shell also announced today the next tranche of its share buyback program. Under the next tranche, Shell will repurchase up to US$2.75 billion worth of shares.
“The company’s intention is to buy back at least $25 billion of its shares by the end of 2020, subject to further progress with debt reduction and oil price conditions,” Shell said.
Following the results release, Shell’s shares in New York were up 1.7 percent at 12:08 EDT on Thursday.
By Tsvetana Paraskova for Oilprice.com
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