Shell Posts 700% Rise In Earnings, Prepares For ‘Lower Forever’ Oil Prices
27 Jul 2017
Shell reported net earnings attributable to shareholders of US$1.92 billion for the second quarter of the year, a more than 700-percent increase from a year earlier when the figure stood at just US$239 million. The figures are based on current cost of supplies – a profit metric used in the oil industry.
Excluding what Shell calls identified items, also called exceptional items, the income attributable to shareholders came in at US$3.6 billion, up from US$1.045 billion a year earlier.
The Anglo-Dutch major’s chief executive said in a statement accompanying the results that free cash flow was US$12.2 billion, including proceeds from divestments as well as investments.
Ben van Beurden said that higher realized oil and gas prices as well as higher production of LNG and, of course, lower costs were the main drivers of profitability.
In spite of Shell’s success in generating a positive cash flow, the oil major laid out a somewhat pessimistic vision for oil prices. Shell CEO Ben van Beurden told shareholders that the company is preparing for a world in which crude oil prices might never return to pre-2014 levels.
In terms of operational results, Shell’s upstream business swung into the black this quarter from a year earlier, rising by almost US$1.7 billion to a positive US$340 million. Downstream earnings, however, were the big driver of total profits, increasing by 39 percent to US$2.5 billion in the reporting period.
Despite the encouraging figures, demonstrating, according to Van Beurden, Shell’s solid performance over the last 12 months, the company will remain “very disciplined”. The chief executive also said that “In the current macro-economic environment, we continue to pull on four levers to strengthen our financial framework divestments, capital investment, operating costs and the delivery of new projects.”
Shell has been saddled with a serious debt load following the acquisition of BG Group last year, and has been actively divesting assets to slim it down. During the second quarter of 2017, divestments came in at US$9.47 billion, up from US$1 billion a year earlier.
In addition to cutting costs at its traditional businesses, the company recently declared its support for renewables, pledging US$1 billion in annual investments in clean energy research and development.