Shell's Profit Rises as Pivot to Gas Pays Off -- Update

By Sarah McFarlane 

LONDON -- Royal Dutch Shell PLC's profit rose in the third quarter, demonstrating the energy giant's resilience to weak energy prices thanks in part to its big bet on natural gas.

Shell on Thursday reported profit on a net current cost-of-supplies basis -- a figure similar to the net income that U.S. oil companies report -- for the three months ended Sept. 30 of $6.08 billion, compared with $5.57 billion in the year-earlier period.

The strong result stood out in an industry that has been hurt by weaker oil and gas prices. The U.K.'s BP PLC and France's Total SA both announced falls in third-quarter earnings, citing lower energy prices. The downstream results for all three companies were better than analysts expected, however, with BP citing high utilization of its refining capacity and Shell noting strong trading revenue.

Exxon Mobil Corp. and Chevron Corp. are due to report results on Friday.

However, Shell's adjusted profit -- excluding items such as income from asset sales -- fell to $4.77 billion from $5.62 billion a year earlier.

Shares in Shell were down 2.4% in early trading in London.

Shell's gas business reported a 23% increase in earnings for the period as production increased from fields in Australia, Trinidad and Tobago, and from the Prelude floating liquefied natural gas project. Shell's energy mix pivoted toward gas with its acquisition of BG Group in 2015.

The company also noted stronger contributions from LNG and oil-product trading. The upstream business was helped by a one-off gain from the sale of assets.

"Upstream was light due to lower natural gas liquids prices, but downstream and integrated gas (LNG) were stand out showstoppers this quarter," said Oswald Clint, analyst at Bernstein.

Shell reiterated its intention to buy back $25 billion of shares, a commitment it made after its acquisition of BG Group, having completed $12 billion so far. The company warned that there was some uncertainty on the pace of the remaining buyback, however, raising doubts over whether the program would be completed by the end of 2020, as previously planned.

"The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback program within the 2020 time frame," said Chief Executive Ben Van Beurden in a statement.

Write to Sarah McFarlane at [e-mail]

(END) Dow Jones Newswires

October 31, 2019 05:40 ET (09:40 GMT)

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