Europe's largest oil company
Royal Dutch Shell plc
) reported weak third quarter 2013 earnings due to high costs,
lower output, supply disruptions in Nigeria and a drop in
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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 $1.43. This was well below the Zacks
Consensus Estimate of $1.70 and the year-ago adjusted earnings
per ADR of $2.10.
However, Shell's revenues were up 3.9% year over year to $116.5
billion amid elevated natural gas prices in North America.
Earlier this week, Shell's continental rival
) beat earnings forecasts, apart from announcing a share
repurchase program and a payout hike.
Upstream segment earnings during the quarter (excluding items)
were $3.5 billion, down 29.4% from $4.9 billion (adjusted) earned
in the year-ago period.
This primarily reflects the impact of lower liquids realizations,
a fall in gas prices ex-North America, higher depreciation and
exploration expenses, increased operating costs, together with
output disruptions in Nigeria. These factors were partly offset
by output boost from the liquids rich-North American shale
assets, ramp-up of the Pearl gas-to-liquids (GTL) development in
Qatar, and higher domestic natural gas realizations.
Shell's upstream volumes averaged 2.9 million oil-equivalent
barrels per day (MMBOE/d), down 1.7% from the year-ago period.
Natural gas volumes rose 4.5%, while crude oil output was down
7.1% from the corresponding period last year. Crude oil
contributed approximately 51% 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 180
Shell's worldwide realized liquids and natural gas prices were
both 2% below their respective year-earlier levels. However,
natural gas prices in North America increased 22% from the last
LNG equity sales volumes of 4.88 million tons were down 2% from
the year-ago quarter, as lower output from Nigeria LNG was only
partially offset by better contribution from the various other
LNG facilities .
In the Downstream segment, the Anglo-Dutch super-major recorded a
profit (excluding items) of $892.0 million as against $1.7
billion in the year-ago period. The negative comparison reflects
the impacts of lower refining profitability, together with weak
marketing and trading contributions.
To some extent, these factors were offset by improving oil
product sales volumes and stronger Chemical earnings.
During the quarter under review, Shell generated cash flow from
operations of $10.4 billion, returned $4.3 billion to
shareholders through dividends/share buybacks and spent $9.7
billion on capital projects.
As of Sep 30, 2013, Shell had $14.3 billion in cash and $37.1
billion in debt (including short-term debt). Net
debt-to-capitalization ratio stood at approximately 11.2%.
Zacks Rank & Stock Picks
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
Meanwhile, one can look at
Matador Resources Co.
Northern Oil & Gas Inc.
) as good buying opportunities. These domestic upstream energy
operators - sporting a Zacks Rank #1 (Strong Buy) - have solid
secular growth stories with potential to rise significantly from