Shell’s earnings soar

Oil giant Shell posted a 245 percent rise in its second quarter earnings, on a current cost of supplies (CCS) basis, and excluding identified items.

Shell’s Q2 2017 earnings, excluding identified items, were $3.6 billion, up 245% from $1 billion for the second quarter of 2016.

The company said the result was boosted by higher contributions from Downstream, driven by improved operational performance and stronger chemicals and refining industry conditions.

Earnings, Shell said, also benefited from higher contributions from Upstream and Integrated Gas which benefited from higher realized prices and increased production from new fields, offsetting the impact of reduced volumes from Pearl GTL in Qatar.

Shell CEO Ben van Beurden 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 $50 per barrel. This quarter, we generated robust earnings excluding identified items of $3.6 billion, while over the past 12 months cash flow from operations of $38 billion has covered our cash dividend and reduced gearing to 25%.

“The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our 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.”

Total dividends distributed to shareholders in the quarter were $3.9 billion, of which $0.9 billion were settled by issuing 33.9 million A shares under the Scrip Dividend Programme.

In the upstream segment, second quarter identified items comprised impairments of $695 million, mainly related to the divestments of Shell’s oil sands interests in Canada and Shell E&P Ireland Limited, and a charge of $183 million related to the impact of the weakening Brazilian real on a deferred tax position.

Shell said that compared with the second quarter 2016, Upstream earnings excluding identified items benefited from higher realized oil and gas prices, lower depreciation including the impact of assets held for sale and divestments, and increased production volumes mainly from assets ramping up. New field start-ups and the continuing ramp-up of existing fields, in particular Lula Alto, Lula Central, Lula South and Iracema North in Brazil, Kashagan in Kazakhstan, and Stones in the Gulf of Mexico, contributed some 184 thousand boe/d to production compared with the second quarter 2016, which more than offset the impact of field declines.

Providing the outlook for the third quarted, Shell said that compared with the third quarter 2016, Upstream earnings are expected to be negatively impacted by a reduction of some 190 thousand boe/d associated with completed divestments, by some 40 thousand boe/d associated with the impact of lower production at NAM in the Netherlands, and by some 30 thousand boe/d associated with higher maintenance.

Upstream earnings in the third quarter, are expected to be positively impacted by some 90 thousand boe/d associated with restored production in Nigeria; however, security conditions remain sensitive, Shell said.

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