Shell Leads Big Oil Revival Despite Crude Price Slump -- 2nd Update
July 27 2017 - 4:23AM
Dow Jones News
By Sarah Kent
LONDON -- Royal Dutch Shell PLC reported strong second-quarter
net profits on Thursday, kicking off a critical round of earnings
for big oil companies trying to show they have adapted to low crude
prices.
The British-Dutch company's equivalent of net profit rose to
$1.9 billion in the second quarter, compared with $239 million at
the same point last year and its cash flow from operations soared
to $11.3 billion. The company said it has generated $38 billion of
cash from its business over the last 12 months, enough to cover
dividend payments and bring down debt levels.
Shell's earnings were reported the same day as French oil giant
Total SA and Norway's Statoil ASA, all of them striking a confident
if cautious note. They trumpeted falling debt levels and strong
cash flow -- a metric that has become increasingly important to
investors who have been worried about oil companies' ability to
cover their spending and dividends without taking on debt.
Total's profit for the quarter was $2 billion, roughly the same
as last year, but the company also reported a significant increase
in cash flow from operations to $4.6 billion and a reduced debt
ratio.
Statoil said it earned $1.4 billion in the second quarter,
compared with a loss of $302 million last year. The company said it
generated $4 billion in free cash flow and reduced net debt by 8
percentage points since the start of the year, despite oil prices
remaining around $50 a barrel.
Though notably better than at the start of 2016 when the price
of crude plummeted to $27 a barrel, oil is still more than 50%
weaker than in 2014 when prices started to fall. The supply glut
that sparked the crash has proved stubbornly persistent despite
efforts by the Organization of the Petroleum Exporting Countries
and other major producers to limit output, prompting several large
banks to cut their oil price forecasts in recent months.
The oil-company earnings on Thursday reflect a yearslong
campaign across the industry to bring down costs and spending to a
point where the companies can operate profitably in a
lower-oil-price environment.
It's an effort that remains ongoing.
Shell said it intends to maintain tight capital discipline going
forward and will continue to focus on bringing down costs and
capital efficiency. Statoil said it expects costs to continue to
improve this year and to squeeze out an additional $1 billion in
efficiencies.
U.S. oil majors Exxon Mobil Corp. and Chevron Corp. are
scheduled report their second-quarter earnings on Friday.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
July 27, 2017 04:08 ET (08:08 GMT)
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