Shell's 1Q Earnings Beat Expectations -- Earnings Review

By Jaime Llinares Taboada

Royal Dutch Shell PLC on Thursday reported results for the first quarter of the year. Here's what we watched:

ADJUSTED CCS EARNINGS: The Anglo-Dutch oil-and-gas major said its first quarter adjusted earnings on a current cost of supply basis jumped to $3.23 billion from $393 million in the fourth quarter. This was above the $3.12 billion market consensus--taken from Vara Research and based on 24 brokers' forecasts. This is a metric similar to the net income that U.S. oil companies report, but strips out exceptional items.

NET PROFIT: Shell's net profit swung to $5.66 billion from a $4.01 billion loss in the fourth quarter of 2020. This included net gains of $1.4 billion on asset sales and $400 million related to changes in the fair value of commodity derivatives. Net profit had been forecast at $3.80 billion--taken from FactSet and based on seven analysts' forecasts.

WHAT WE WATCHED:

--NATURAL GAS: The contribution of the integrated gas segment to adjusted earnings increased 28% quarter-on-quarter, to $1.11 billion. Shell said the business benefited from stronger realized prices for oil and liquefied natural gas. As already anticipated, the company said trading gains from the Texas winter storms were offset by higher expenses related to provisions for counterparty credit risk.

--PRODUCTION: Shell's production in the first quarter rose 4% from October-December 2020, to 3.49 million oil-equivalent barrels a day. This reflected the restart of the Prelude LNG platform in Australia, favorable gas seasonal effects, and the impact of the Gulf of Mexico hurricanes in the previous period. However production is expected to be lower in the second quarter, on the back of lower seasonal demand and asset sales.

--NET DEBT: Strong cash flow generation helped Shell reduce its debt during the first quarter of 2021. Net debt as of March 31 was $71.25 billion, down from $75.39 billion by the end of 2020. The group has a target to reduce net debt to $65 billion before distributing 20%-30% of cash flow from operations to shareholders through dividends and share buybacks.

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

(END) Dow Jones Newswires

April 29, 2021 05:47 ET (09:47 GMT)

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