Europe's largest oil company
Royal Dutch Shell plc
) reported robust second quarter earnings due to strong
realizations on its lucrative crude oil exploration and production
Hague-based Shell reported earnings per ADR (on a current cost of
supplies basis) - excluding one-time items and gains or losses from
inventories - of $1.94. This was well above the Zacks Consensus
Estimate of $1.72 and the year-ago figure of $1.46.
Along with the earnings beat, Shell also decided to reward the
investors by announcing $30 billion worth share buybacks and
dividends for 2014 and 2015.
However, revenues were down 1.3% to $111.2 billion, reflecting
The Hague-based group is the second of the integrated supermajors
to come out with second quarter results. On Tuesday, Shell's
continental rival BP plc (
) missed earnings forecasts despite reporting a jump in profits and
warned investors about potential adverse effects from the Russian
turmoil. U.S. biggies Exxon Mobil Corp. (
) and Chevron Corp. (
) are scheduled to report later this week.
Upstream segment earnings during the quarter (excluding items) were
$4.7 billion, a considerable rise from the $3.5 billion (adjusted)
earned in the year-ago period.
This primarily reflects the impact of strengthening liquids prices
and production, together with positive effects from a firm
Australian dollar on a deferred tax liability. To some extent,
these factors were negated by the phasing of a dividend from an LNG
unit, plus higher exploration expenses and depreciation.
Shell's upstream volumes averaged 3,077 thousand oil-equivalent
barrels per day (MBOE/d), essentially flat from the year-ago
period. Natural gas volumes was up slightly, which was offset by a
fall in crude oil output. Liquids contributed approximately 49% 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 - particularly Majnoon in Iraq and Mars B in the
Gulf of Mexico - that boosted output by roughly 140 MBOE/d.
However, this was offset by the effect of field declines.
Shell's worldwide realized liquids prices were 3% above their
year-earlier levels but natural gas realizations fell 8% from the
second quarter of 2013. However, natural gas prices in North
America jumped 16% from the last year's level.
LNG equity sales volumes of 6 million tons were up 28% from the
year-ago quarter, as contribution from the acquisition of
Spain-based Repsol S.A.'s LNG properties and better operating
performance in Nigeria.
In the Downstream segment, the Anglo-Dutch super-major recorded a
profit (excluding items) of $1.3 billion as against $1.2 billion in
the year-ago period. The positive comparison reflects the impacts
of strength in manufacturing and chemical operations, somewhat
offset by higher costs, together with weak marketing and trading
During the quarter under review, Shell generated cash flow from
operations of $8.6 billion, returned $3.3 billion to shareholders
through dividends/share buybacks and spent $8.5 billion on capital
As of Jun 30, 2014, Shell had $15.4 billion in cash and $44.1
billion in debt (including short-term debt). Net
debt-to-capitalization ratio stood at approximately 13.4%.
Royal Dutch Shell currently retains a Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
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