Shell's Profit Rises as Pivot to Gas Pays Off -- Update
October 31 2019 - 5:55AM
Dow Jones News
By Sarah McFarlane
LONDON -- Royal Dutch Shell PLC's profit rose in the third
quarter, demonstrating the energy giant's resilience to weak energy
prices thanks in part to its big bet on natural gas.
Shell on Thursday reported profit on a net current
cost-of-supplies basis -- a figure similar to the net income that
U.S. oil companies report -- for the three months ended Sept. 30 of
$6.08 billion, compared with $5.57 billion in the year-earlier
period.
The strong result stood out in an industry that has been hurt by
weaker oil and gas prices. The U.K.'s BP PLC and France's Total SA
both announced falls in third-quarter earnings, citing lower energy
prices. The downstream results for all three companies were better
than analysts expected, however, with BP citing high utilization of
its refining capacity and Shell noting strong trading revenue.
Exxon Mobil Corp. and Chevron Corp. are due to report results on
Friday.
However, Shell's adjusted profit -- excluding items such as
income from asset sales -- fell to $4.77 billion from $5.62 billion
a year earlier.
Shares in Shell were down 2.4% in early trading in London.
Shell's gas business reported a 23% increase in earnings for the
period as production increased from fields in Australia, Trinidad
and Tobago, and from the Prelude floating liquefied natural gas
project. Shell's energy mix pivoted toward gas with its acquisition
of BG Group in 2015.
The company also noted stronger contributions from LNG and
oil-product trading. The upstream business was helped by a one-off
gain from the sale of assets.
"Upstream was light due to lower natural gas liquids prices, but
downstream and integrated gas (LNG) were stand out showstoppers
this quarter," said Oswald Clint, analyst at Bernstein.
Shell reiterated its intention to buy back $25 billion of
shares, a commitment it made after its acquisition of BG Group,
having completed $12 billion so far. The company warned that there
was some uncertainty on the pace of the remaining buyback, however,
raising doubts over whether the program would be completed by the
end of 2020, as previously planned.
"The prevailing weak macroeconomic conditions and challenging
outlook inevitably create uncertainty about the pace of reducing
gearing to 25% and completing the share buyback program within the
2020 time frame," said Chief Executive Ben Van Beurden in a
statement.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
October 31, 2019 05:40 ET (09:40 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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