Shell reports on first quarter financial results

On 30 April 2015 Royal Dutch Shell plc released its first quarter results and first quarter interim dividend announcement for 2015.

First quarter highlights

  • Royal Dutch Shell’s 1Q15 earnings, on a current cost of supplies (CCS) basis, were US$4.8 billion compared with US$4.5 billion for 1Q14.
  • 1Q15 CCS earnings excluding identified items were US$3.2 billion compared with US$7.3 billion for 1Q14, a decrease of 56%.
  • Compared with 1Q14, CCS earnings excluding identified items benefited from improved Downstream results reflecting steps taken by the company to improve financial performance, higher realised refining margins, lower costs, and increased trading contributions. In Upstream, earnings were impacted by the significant decline in oil and gas prices and lower trading contributions. Weaker exchange rates resulted in a hurt to deferred tax positions of some US$700 million compared with the first quarter 2014, which were not included as identified items. This was partly offset by lower costs and new high margin liquids production volumes from new deep water projects and improved operational performance.
  • Basic CCS earnings per share excluding identified items for 1Q15 decreased by 56% versus the same quarter a year ago.
  • Cash flow from operating activities for 1Q15 was US$7.1 billion. Excluding working capital movements, cash flow from operating activities for 1Q15 was US$7.5 billion.
  • Cash dividends paid to Royal Dutch Shell plc shareholders in 1Q15 were US$2.9 billion. During the first quarter some 12.7 million shares were bought back for cancellation for a consideration of US$0.4 billion.
  • Gearing at the end of 1Q15 was 12.4%.
  • A 1Q15 dividend has been announced of US$0.47 per ordinary share and US$0.94 per American Depositary Share (ADS).

“Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices. Meanwhile, in what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell,” said Ben van Beurden, CEO of Royal Dutch Shell.

“Part of this sharper focus is the sale of non-strategic assets. Asset sales total over US$2 billion so far this year, as we successfully reduced our onshore footprint in Nigeria.

“In parallel we continue to reduce our operating costs and capital spending; and by deferring and reshaping new projects, we can achieve further efficiencies and savings in the global supply chain. Looking ahead, the proposed combination with BG, which we announced in April, would create a stronger company for both sets of shareholders.

“The combination with BG would accelerate Shell's growth strategy in deep water and LNG, and create a springboard for further optimisation of our asset base, particularly when evaluating the longer term portfolio.”

Commentary

Kim Fustier, Analyst at Edison Investment Research, commented on the results:

“Shell beat consensus expectations by ?30% in 1Q15 thanks to a blowout quarter in refining and marketing, where BP and Total also beat on Tuesday. Its downstream division posted the best quarterly earnings since the ‘golden age of refining’ in 2006 - 2007. Refining and marketing profits were buoyed by strong global refining margins, cost savings initiatives and a healthy contribution from trading. Other majors, with high exposure to downstream such as Exxon should also benefit from the current favourable refining environment, highlighting the value of integration.

“Shell’s upstream performance was far less stellar, due to lower oil and gas prices and FX movements. Upstream Americas made its biggest quarterly loss in at least a decade.

“Having previously guided to flat y/y capex of US$35 billion in 2015, Shell is now pointing to a US$2 billion reduction versus last year’s levels, reflecting delays to project sanctions. This does not come as a huge surprise as oilfield service costs continue to fall, giving majors opportunities to lower their project break evens.”

Will Hedden, Dealer at London Capital Group, said:

"Shell took its cue from smaller oil major BP with refining and trading softening the blow more than expected from the loss to profits from low oil prices. The FTSE’s biggest constituent reported first quarter net income of US$3.2 billion profit, down 56% on a year ago, but above expectations of US$2.4 billion. The further US$2 billion cut to capex, now US$33 billion guided for investment in 2015, may tighten the squeeze on the oil and gas support services market."


Adapted from press release by Rosalie Starling

Published on 30/04/2015


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