Shell Profits Soar as Oil Sector Bounces Backc-- 2nd Update

By Sarah Kent Features Dow Jones Newswires

Royal Dutch Shell PLC on Thursday reported a sharp increase in profit in the first quarter, rounding off a bumper set of results for the world's biggest oil companies as years of cost-cutting and a fragile recovery in oil prices begin to pay off.

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The Anglo-Dutch oil and gas giant said profit more than quadrupled in the first three months of 2017 compared with a year earlier, benefiting from a near-60% increase in oil prices and efforts to transform the company following its roughly $50 billion acquisition of BG Group last year. The deal was intended to boost Shell's production and give it a leading position in fast-growing liquefied natural gas markets and Brazil's coveted deep-water oil fields.

"2016 was a transition year, and 2017 is the year in which we follow through in the delivery," Shell's chief financial officer, Jessica Uhl, said on a media call. "The strategy we've outlined to deliver a world class investment case is working."

Investors reacted positively to the results, sending Shell's shares more than 3% higher in early London trading.

The company's performance mirrors a strong improvement in earnings from the major oil companies in the first quarter, leaving investors hopeful that the companies may be on the path to recovery following a precipitous drop in oil prices since the summer of 2014.

Last week, Exxon Mobil Corp. reported its best quarter since 2015. Chevron Corp., France's Total SA and BP PLC have also all reported a sharp increase in profits for the first quarter. Earlier Thursday, Norway's Statoil ASA reported net earnings of $1.06 billion for the period, up from $611 million a year earlier.

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Shell said first-quarter profit on a current cost-of-supplies basis--a number similar to the net income that U.S. oil companies report--soared to $3.4 billion in the first three months of the year, up from $814 million for the same period in 2016. Quarter-on-quarter, the company said it saw higher earnings in all business segments.

Cash flow from operating activities grew to $9.5 billion, up from $700 million in the first quarter of 2016 and sufficient to cover the company's cash dividends for the period. The improvement is likely to reassure investors previously nervous about the impact that the slump in oil prices would have on their cash returns.

The company is still working to keep the pressure on costs and operational efficiency to strengthen cash flow further. The company said it has already more than doubled its cash generation from the last time oil prices were at a similar level, with only part of this driven by higher production.

Shell also made progress in lowering debt, which rose sharply last year when the company turned to financing to pay for its BG deal. It is now more than two-thirds of the way through an ambitious $30 billion divestment program crucial to its plan to streamline its portfolio by next year as part of efforts to reduce debt.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

May 04, 2017 06:04 ET (10:04 GMT)