Royal Dutch Shell avoided its first ever quarterly loss after strong oil trading helped offset a slump in revenue from its oil and gas operations as a result of the coronavirus pandemic.
French oil giant Total followed suit as all the world’s major energy firms felt the sting of collapsed oil and gas demand.
Shell’s adjusted earnings slumped to $600m (£463m) for the three months to June, down from $3.5bn in the same period last year.
However, the results beat analysts’ expectations of a $674m loss for the quarter, which would have marked the first ever quarterly loss for the Anglo-Dutch oil firm.
Total saw profit shrink 96 per cent to $126m, considerably ahead of forecasts of a $520m loss.
Despite the slump, the group said that it would maintain its dividend of €0.66 per share this year.
Shell also slashed the value of its assets by $16.8bn after lowering its short-term oil and gas price outlook due to slow growth in demand in the wake of the coronavirus crisis.
The writedown marks a slight bright spot for the firm, after the company warned last month it was set to slash the value of its oil and gas assets by up to $22bn as the coronavirus crisis hollowed out energy demand.
The world’s largest oil and gas trader said it saw an unprecedented slump in global demand due to the pandemic, with oil products sales down 39 per cent for the period. The firm said its aviation, retail and refining and trading units took the biggest hit from the virus.
Shell, the world’s largest retailer with over 40,000 petrol stations, also reported a 39 per cent drop in fuel sales for the period.
The oil titan said it expects net expenses of $3.2bn to $3.5bn for 2020, as coronavirus continues to weigh on demand.
Shell said it was on track to deliver its cost reduction targets, after it slimmed down its underlying operating expenditure by $1.1bn compared to the first quarter.
Why it’s interesting
Lockdowns around the world have knocked global energy demand, with benchmark Brent oil prices falling below $30 a barrel in the second quarter — down by more than half from a year earlier.
High volatility in oil prices throughout the lockdown allowed traders to make large profits by betting on price movements and stocking up on fuel to sell at higher prices in the future.
Shell has traditionally weathered global crises due to its large refining operations, whose profit margins are boosted by lower crude oil prices and stronger fuel demand.
The better-than-expected results for Shell came after “very strong contributions from crude and oil products trading and optimisation as well as lower operating expenses”, the company said today.
Shares were down 0.2 per cent to 1,225p in morning trading.
Shell was quick to respond to the coronavirus crisis, immediately cutting its dividend for the first time the Second World War and cutting planned spending by $5bn to a maximum of $20bn in 2020.
The firm plans to announce a major restructuring by the end of the year, as it looks to respond to a shift in global demand as a result of the pandemic.
What Shell said
Ben van Beurden, Royal Dutch Shell chief executive, said:
“Shell has delivered resilient cash flow in a remarkably challenging environment. We continue to focus on safe and reliable operations and our decisive cash preservation measures will underpin the strengthening of our balance sheet.
Our high-quality integrated portfolio, disciplined execution and forward-looking strategy enable sustained competitive free cash flow generation.”