Shell Posts Narrowed 3Q Profit, Pledges to Cut Debt Amid New Cash Allocation Framework

By Jaime Llinares Taboada

Royal Dutch Shell PLC on Thursday reported significantly narrowed profit for the third quarter and unveiled a new cash allocation framework which includes a target to reduce net debt to $65 billion.

The Anglo-Dutch oil major made a net profit of $489 million in the three months to Sept. 30, narrowing from $5.88 billion profit a year earlier. Weak oil and gas prices and low demand for refined products continued to impact its business.

Shell also posted an adjusted CCS profit--a figure similar to the net income that U.S. oil companies report, but strips out exceptional items--of $955 million. It beat the market consensus of $146 million taken from Vara Research and based on 26 analysts' forecasts, and improved on quarter from $638 profit reported in the previous quarter.

Alongside the quarterly earnings, Shell announced a new cash allocation strategy to reduce debt, increase shareholders' distributions and allow for disciplined growth. The company intends to use future cash flows to grow its low-carbon businesses.

"We must continue to strengthen the financial resilience of our portfolio as we make the transition to become a net-zero emissions energy business. Our decisive actions taken earlier in the year have solidified our operational and cash delivery," Chief Executive Ben van Beurden said.

As part of this framework, Shell said it will cut net debt to $65 billion from $73.5 billion as at Sept. 30, and afterward distribute 20%-30% of operating cash flows via dividends and share buybacks.

The FTSE 100 group declared dividend growth of around 4% for the third quarter and annually thereafter. It proposed a payment of 16.65 cents for the third quarter, up from 16 cents previously.

Write to Jaime Llinares Taboada at [e-mail]; @JaimeLlinaresT

(END) Dow Jones Newswires

October 29, 2020 03:42 ET (07:42 GMT)

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