Shell's profits climb nearly 50 per cent as oil prices sit at two-year highs

 
Courtney Goldsmith
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Shell was boosted by rising oil prices (Source: Getty)

Royal Dutch Shell's profits jumped nearly 50 per cent in the third quarter following a strong performance from the company's refining business and a boost from higher oil prices.

The figures

Shell reported income attributable to shareholders, based on the current cost of supplies and excluding exceptional items, of $4.1bn (£3.1bn), up from $2.8bn the previous year. Analysts had only expected net income of $3.62bn.

Upstream operations generated $562m in the quarter, up from $4m in 2016, while downstream operations rose to $2.7bn from $2.1bn.

Earnings were boosted by a strong performance at Shell's refining business, where profits tripled after hurricanes knocked out refining capacity in the US. Profits at the company's chemicals division also shot up 20 per cent.

Total production grew two per cent to 3.7m barrels of oil equivalent per day (boepd).

Cash flow from operating activities dropped to $7.6bn.

Shell's share price rose 2.23 per cent to 2,412.25p in afternoon trading.

Read more: Rio Tinto's ex-chief of finance steps down at Shell over fraud charges

Why it's interesting

The oil industry breathed a sigh of relief last month as oil prices rose to a two-year high of around $60 per barrel, but oil majors like Shell and BP have shown they can now balance their books with lower oil prices.

Brent crude averaged $52 per barrel in the quarter.

Shell has also shown it is back in the growth game after it last week won a number of new blocks in Brazil's deepwater oil auction.

Russ Mould, AJ Bell investment director, noted the importance of cash flow for the oil major. “Most investors will look at profits but the real key is cash flow.

“Cash flow is still not as high as you would like and there is more work to do, but if confidence rises that the dividend can be readily funded by strong profits and cash flow – and not short-term fixes like cutting investment, selling assets or raising debt (all of which weaken the company in the long-term) - then the shares could still prove popular, especially with income-seekers.”

Shell is the single biggest payer of dividends in the FTSE 100.

What Shell said

Chief executive Ben van Beurden said:

Shell’s three businesses all made resilient contributions to this strong set of results. Upstream generated almost half of the $10bn cash flow from operations excluding working capital this quarter, at an average Brent oil price of $52 per barrel, and this was complemented by good cash contributions from our growing integrated gas business and from downstream.

This competitive performance is further evidence of Shell’s growing momentum, and strengthens my firm belief that our strategy is working.

Read more: Shell ties up sale of North Sea asset package to Chrysaor for up to $3.8bn

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