Europe's largest oil company Royal Dutch Shell
plc ( RDS.A ) reported
strong first quarter 2013 earnings, helped by higher natural gas
prices and stronger refining margins.BRASKEM SA (BAK): Free Stock Analysis ReportBP PLC (BP): Free Stock Analysis ReportROYAL DTCH SH-A (RDS.A): Free Stock Analysis
ReportSASOL LTD -ADR (SSL): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment
The Hague-based Shell, which follows continental rival BP
plc ( BP )
in coming out with better-than-expected profits, reported earnings
per ADR (on a current cost of supplies basis) - excluding one-time
items and gains or losses from inventories - of $2.38. This was
above the Zacks Consensus Estimate of $2.07 and the year-ago
adjusted earnings per ADR of $2.34.
However, Shell's revenues were down 5.9% to $112.8 billion amid
depressed oil prices.
Upstream: Upstream segment earnings during the
quarter (excluding items) were $5.6 billion, down 9.9% from $6.3
billion (adjusted) earned in the year-ago period.
This primarily reflects the impact of lower liquids realizations,
higher depreciation and exploration expenses, increased operating
costs, together with less profit from liquefied natural gas (LNG)
projects. These factors were partly offset by higher sales price of
gas, ramp-up of the Pearl gas-to-liquids (GTL) development in
Qatar, an increase in trading contributions, and tax credits.
Shell's upstream volumes averaged 3.6 million oil-equivalent
barrels per day (MMBOE/d), essentially unchanged from the year-ago
period. Natural gas volumes rose 2.7%, while crude oil output was
down 2.5% from the corresponding period last year. Crude oil
contributed approximately 46% of Shell's total volumes, while
natural gas accounted for the rest.
Production during the quarter compared with the year-ago quarter
included volumes from new field start-ups and the continued ramp-up
of existing fields, which boosted output by roughly 175
Shell's worldwide realized liquids prices were 7% below the
year-earlier level, while natural gas realizations increased by 8%.
In particular, natural gas prices in North America jumped 19% from
the last year's level.
LNG equity sales volumes of 5.15 million tons were flat with the
year-ago quarter, as contribution from the Pluto LNG development in
Australia were offset by lower output from Nigeria LNG.
Downstream: In the Downstream segment, the
Anglo-Dutch super-major recorded a profit (excluding items) of $1.8
billion as against $1.2 billion in the year-ago period. The
positive comparison reflects the impacts of higher refining
profitability, Shell's improved operating efficiency, solid
marketing and trading contributions, together with higher Chemical
To some extent, these factors were offset by unfavorable foreign
currency movements, increased depreciation, and a rise in
During the quarter under review, Shell generated cash flow from
operations of $11.6 billion, returned $3.2 billion to shareholders
through dividends/share buybacks and spent $8.8 billion on capital
As of Mar 31, 2013, Shell had $17.6 billion in cash and $35.8
billion in debt (including short-term debt). Net
debt-to-capitalization ratio stood at approximately 9.1%.
Royal Dutch Shell currently carries a Zacks Rank #5 (Strong Sell),
implying that it is expected to significantly underperform the
broader U.S. equity market over the next one to three months.
Meanwhile, one can look at other international integrated energy
firms like Sasol Ltd. ( SSL ) and
Braskem S.A. ( BAK ) as attractive
investments. Both these firms - sporting a Zacks Rank #2 (Buy) -
offer value and are worth accumulating at current levels.