Anglo-Dutch oil titan Royal Dutch Shell on Thursday logged third-quarter net profit of $489 million (415 million euros), rebounding after a vast coronavirus-driven loss in the prior three months.
Profit after tax for July-September was boosted by steadier oil prices and contrasted with a vast net loss of $18.1 billion in the second quarter, when Shell was slammed by Covid-19.
Earlier this year, oil prices dropped off a cliff — and even briefly turned negative — as airlines grounded planes worldwide, businesses closed their doors and the world economy tanked into a downturn.
Crude futures also crashed on the back of a vicious price war between key producers Saudi Arabia and Russia.
But in the third quarter, Shell was boosted by a modest recovery in global crude demand and the more stable oil market, having taken a colossal $16.8-billion charge in April-June.
Crude oil currently stands at just under $40 per barrel, still below the roughly $60 a barrel seen in the third quarter of last year, when the group posted a net profit of $5.9 billion.
Despite higher prices, the oil market remains depressed by the coronavirus health emergency which has slammed economic growth and savaged the world’s appetite for oil.
That has in turn sparked thousands of job losses across the energy sector and beyond.
Shell has already announced that it is seeking to axe up to 9,000 jobs or more than 10 percent of its global workforce in response to fallout from the deadly pandemic.
The company’s fierce rival BP, which posted a third-quarter net loss of $450 million on Tuesday, is in the process of axing about 10,000 jobs or 15 percent of its staff.
– ‘Significant uncertainty’ ahead –
“Our decisive actions taken earlier in the year have solidified our operational and cash delivery,” said Shell Chief Executive Ben van Beurden, who oversees 80,000 staff across more than 70 countries.
“The strength of our performance gives us the confidence to lay out our strategic direction (and) resume dividend growth,” he added.
Shell added Thursday that it would increase its shareholder payout by about four percent to 16.65 US cents for the third quarter, and annually thereafter.
The group had stated in September that it was aiming to generate annual savings of between $2 billion and $2.5 billion via a massive restructuring drive.
Although oil prices have rebounded to a steadier footing, the market has dived this week as traders fretted over the imposition of lockdowns in Europe to combat a second wave of Covid-19 infections.
World oil prices sank Thursday by another 5.0 percent on fears that new coronavirus lockdowns in Europe would further dent demand for crude.
Shell meanwhile warned over the outlook for the fourth quarter amid mounting concern over the pandemic’s resurgence.
“As a result of Covid-19, there continues to be significant uncertainty in the macroeconomic conditions with an expected negative impact on demand for oil, gas and related products,” it said.
“Furthermore, global developments and uncertainty in oil supply have caused volatility in 2020 in commodity markets.”
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Shell raises dividend as retail boost drives confidence
Royal Dutch Shell on Thursday raised its dividend after easily beating quarterly profit forecasts and outlined plans to shrink its oil and gas operations as it presses forward with a transition to low-carbon energy.
The Anglo-Dutch company hit record earnings from its vast retail division, despite the impact on demand of the COVID-19 pandemic, which it said continued to generate “significant uncertainty”.
In a sign of renewed confidence, Shell said it would boost its dividend on an annual basis after it cut the payout in April for the first time since the 1940s.
“We are starting a new era of dividend growth,” CEO Ben van Beurden told reporters in a call.
The company’s shares rose 2.2% by 0904 GMT.
Shell is planning a major restructuring as part of “a complete overhaul” to reduce greenhouse gas emissions to net zero by 2050.
In line with plans to shrink its oil and gas portfolio, it said on Thursday it would cut back its oil refineries from 14 sites to six “energy and chemical parks”.
And it named nine hubs for oil and gas production: Brazil, Brunei, Gulf of Mexico, Kazakhstan, Malaysia, Nigeria, Oman, Permian and Britain’s North Sea.
Shell also plans to shed up to 9,000 jobs, or more than 10% of its workforce.
Shell’s shares have dropped by more than 60% so far this year, more than any other major oil company, as investors fret over the impact of the pandemic on energy demand and the long-term energy transition.
But following its strong quartlerly results, Shell outlined a long-term plan to reduce debt to $65 billion and to aim for shareholder distributions of 20-30% of cash flow. Its debt at the end of September was $73.5 billion, down from $77.8 billion in the previous quarter.
Shell’s capital investment will remain in a range of between $19 and $22 billion in the near term while it targets annual divestments of $4 billion.
Shell’s adjusted earnings https://graphics.reuters.com/SHELL-RESULTS/qzjpqamxlpx/chart.png
Shell said the pandemic’s impact on demand has extended into the fourth quarter, with refining expected to run at 69% to 77% of capacity.
“As a result of COVID-19, there continues to be significant uncertainty in the macroeconomic conditions with an expected negative impact on demand for oil, gas and related products,” Shell said in a statement.
Its adjusted earnings in the third quarter fell 80% to $955 million, but easily beat company-provided average analysts forecasts of a $146 million profit.
Shell increased its quarterly dividend to 16.65 cents.
“Very strong performance from Shell, handsomely beating our and consensus estimates,” Bernstein analyst Oswald Clint said in a note.
The results were driven by a record profit from Shell’s marketing division, which includes the world’s biggest retail network. Earnings in the segment were up 10% on the year at $1.6 billion for the quarter on 20% lower product sales than a year ago.
Shell, the world’s biggest Liquefied Natural Gas trader, wrote down the value of its LNG portfolio by just under $1 billion in the quarter, focusing on its flagship Prelude project in Australia.
Shell in July had cut the value of its oil and gas assets, including Prelude, by $16.8 billion in the second quarter after sharply lowering its price outlook. Yahoo