Shell 4Q profit boosted by higher prices

Oil company Shell reported a profit on the current cost of supply (ex-identified items) of $5.7 billion for the fourth quarter of 2018. This was an increase of 32 percent compared to $4.3 billion recorded in the fourth quarter of 2017.

Shell said that compared with the fourth quarter 2017, CCS earnings attributable to shareholders mainly benefited from higher realized oil, gas and LNG prices as well as stronger contributions from crude oil and LNG trading, partly offset by movements in deferred tax positions. Full-year earnings of $21.4 billion also reflected higher realized oil, gas and LNG prices, partly offset by movements in deferred tax positions, Shell said.

Cash flow from operating activities for the fourth quarter 2018 was $22 billion, which included positive working capital movements of $9.1 billion, mainly as a result of a fall in crude oil price and lower inventory levels. Excluding working capital movements, cash flow from operations of $12.9 billion mainly reflected increased earnings, compared with the fourth quarter 2017, Shell said.

Royal Dutch Shell Chief Executive Officer, Ben van Beurden, said: “Shell delivered a very strong financial performance in 2018, with cash flow from operations of $49.6 billion, excluding working capital movements. We delivered on our promises for the year, including the completion of the $30 billion divestment program and starting up key growth projects while maintaining discipline on capital investment.

“We paid our entire dividend in cash, further reduced our debt and launched our share buyback program, with $4.5 billion in shares repurchased so far. We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns. Our strategy to deliver a world-class investment case is working.”

During the quarter, Shell completed the sale of its Upstream interests in Ireland, as well as the disposal of its interests in the Draugen and Gjøa fields in Norway. In December, Shell and its partners renewed a number of onshore oil mining leases in the Niger Delta for 20 years (Shell interest 30%).

In the fourth quarter,  total production was around 2,8 million barrels of oil equivalent per day, an increase by 1% compared with the same quarter a year ago, mainly driven by new field start-ups and ramp-ups, partly offset by divestments.

Looking ahead for into the current quarter, Shell said that compared with the first quarter 2018, Integrated Gas production is expected to decrease by some 140 – 170 thousand boe/d, mainly due to divestments, the transfer of some activities into the Upstream segment as of 2019 and higher maintenance activities.

LNG liquefaction volumes are expected to be 0.4 – 0.7 million tonnes lower, mainly as a result of divestments and higher maintenance activities.

Compared with the first quarter of 2018, Upstream production is expected to be 10 – 50 thousand boe/d lower, mainly due to divestments and field decline, partly offset by ramp-ups of existing fields.

Here’s what Shell CFO Jessica Uhl had to say about Shell’s performance for the quarter.