Shell's Profit Nearly Triples -- WSJ

By Sarah Kent Features Dow Jones Newswires

Recovering oil prices, increased production and cost cutting help lift quarterly results

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 3, 2017).

LONDON -- Royal Dutch Shell PLC said Thursday its profits nearly tripled in the third quarter compared with a year earlier, helped by recovering oil prices, better conditions for its refineries and an increase in oil-and-gas production.

The British-Dutch oil giant said its quarterly profit on a current cost-of-supplies basis -- a number similar to the net income that U.S. oil companies report -- was $3.7 billion, up from $1.4 billion a year earlier.

Shell's earnings were lifted by conditions that have boosted the fortunes of most giant oil companies, which have regained a level of equilibrium after years of scrambling to adapt to the sharp drop in oil prices since 2014.

Last week, Exxon Mobil Corp and Chevron Corp. both reported increases in third-quarter profits of about 50% compared with the prior year. French oil major Total SA saw its earnings jump 40%. On Tuesday, British oil giant BP PLC said it could cover its spending and dividends with cash with oil at $49 a barrel.

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Driving the results are modestly recovered oil prices and a raft of cost cuts that Shell and others say have changed how they do business.

The international oil price benchmark, known as Brent, averaged around $52 a barrel in the third quarter, up since dipping below $30 a barrel in early 2016 but much below a 2014 peak of $114 a barrel. This week, Brent climbed above $60 a barrel for the first time in two years.

Shell said it was able to cover its shareholder payouts with cash at current oil prices -- a newly important metric for investors worried about the safety of their dividends in a low-oil-price world. The company's chief executive, Ben van Beurden, has vowed that the company's mind-set on oil prices is that they will be "lower forever."

"We're trying to build a company that's resilient through very low-price environments," Chief Financial Officer Jessica Uhl said Thursday.

Shell's share price has climbed to levels not seen since before prices crashed three years ago. It was up by nearly 1% on Thursday morning in London, on a day when other energy shares and Brent crude prices were down.

Strong performance in Shell's refining and chemicals division helped underpin earnings in the third quarter. Big oil companies have benefited from owning oil-processing plants throughout the downturn, as these businesses buy crude and benefit from low prices.

The company's exploration and production arm also returned to profit in the quarter, boosted by higher prices and new production volumes in its integrated gas unit helped raise output by 2%, offsetting declines elsewhere and the impact of divestments. Shell said it produced 3.7 million barrels of oil equivalent a day in the third quarter, up roughly 100,000 barrels a day from the second quarter.

Shell also managed to keep a lid on debt levels, which ballooned after its $50 billion acquisition of BG Group in 2016. Net debt fell to $67.7 billion at the end of the third quarter, compared with $77.8 billion a year earlier, helped by a continuing asset disposal program and steep cost-cutting.

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

(END) Dow Jones Newswires

November 03, 2017 02:47 ET (06:47 GMT)