Royal Dutch Shell Couldn't Capitalize on Rising Oil Prices in the Second Quarter

Rds Earnings
Rds Earnings

Image source: Royal Dutch Shell, author's chart.

On the cash front, Shell's results were better, but not by much. The company generated $2.2 billion in cash for the quarter, and that came nowhere close to meeting its quarterly capital expenditures of $5.8 billion. Investors can perhaps forgive weaker results since the company's realized natural gas prices slipped a bit in the quarter, but it has been touting cost-cutting that just doesn't seem to be flowing to the bottom line. To cover the cash shortfall, it issued $9.7 billion in new debt, and its debt-to-capital ratio of 28.1% is starting to reach the top of its target range.

From the mouth of management

In spite of the results, CEO Ben Van Beurden continued to toe the company line about lowering costs and working through the integration of BG Group:

What a Fool believes

In Shell's defense, it's way too early to say if the BG Group acquisition is a stud or a dud. It still has a lot of work to do in bringing the two operating companies together under a common platform and identify some places where it can either trim the fat or beef up operations. Based on this initial result, though, things aren't looking great. Oil prices did rise in the quarter, yet Shell's upstream business generated even deeper losses. Investors should certainly give the company more time to work through this transformation, but we're going to have to start to see some form of improvement in the coming quarters.

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Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.comor on Twitter @TylerCroweFool.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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