LONDON • Royal Dutch Shell reported a near 50 per cent rise in quarterly profits, driven by strong refining, while solid cash generation underscored that the oil and gas company has adapted well to a world of low oil prices.
The Anglo-Dutch company sharply boosted its cash generation in recent quarters as the effects of cost cuts and asset sales kicked in, following chief executive Ben van Beurden's preparations for "longer forever" oil prices following the 2014 downturn.
"Shell's three businesses all made resilient contributions to this strong set of results," Mr van Beurden said in a statement, referring to downstream operations, oil and gas.
Shell and most of its rivals are now able to generate profit even if oil prices return to about US$50 (S$68) a barrel, and are once again focusing on growing their businesses. Oil prices averaged US$52 a barrel in the quarter and are today above US$60 a barrel.
In a sign of a renewed emphasis on growth, last week, Shell won half the blocks awarded in Brazil's deep-water oil auction, where rivals BP and Exxon Mobil also acquired blocks in a historic opening to foreign operators.
Shell's third-quarter earnings rose mostly due to a trebling of profits from the refining segment, which benefited from a sharp rise in profit margins in the wake of Hurricane Harvey in late August which knocked out a quarter of the United States' refining capacity.
Shell's chemicals segment, a key engine for its growth into the next decade, also saw profits rise by 20 per cent from a year earlier. "The numbers were strong. The downstream was the key driver again," said Mr Iain Reid, analyst at Macquarie.
Third-quarter net income attributable to shareholders, based on current cost of supplies and excluding exceptional items, was US$4.1 billion. That compared with US$2.8 billion a year earlier and a company-provided analysts' consensus of US$3.62 billion.
Oil and gas production in the quarter was up 2 per cent at 3.657 million barrels of oil equivalent.
Cash flow from operations in the third quarter fell by 33 per cent from the previous quarter to US$7.58 billion for the first time since the first quarter of last year. The drop in cash flow was due to increases in value of inventories as oil prices rose from a year ago, Shell said.
Shell's debt ratio versus company capitalisation, known as gearing, slightly rose to 25.4 per cent from 25.3 per cent the previous quarter. That was still significantly lower than a peak of 29.2 percent reached in the third quarter of last year that followed the US$54 billion acquisition of BG Group last February. Shell's debt pile in the third quarter came to US$68 billion.
Shell has sold or agreed to sell around US$25 billion worth of assets to help pay for the BG deal.