Royal Dutch Shell's (RDS.A) Q1 Earnings Soar on Oil Price

Europe's largest oil company Royal Dutch Shell plcRDS.A reported stronger-than-expected first-quarter results, as its upstream business swung to a profit on rebounding oil prices .

Shell follows major rivals including Chevron Corp. CVX , ExxonMobil Corp. XOM and BP plc BP in beating quarterly profit forecasts helped by increased liquids realizations.

The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items) of 92 cents, breezing past the Zacks Consensus Estimate of 82 cents and the year-ago adjusted profit of 44 cents.

Revenues of $73,311 million were 47% above the first-quarter 2016 sales of $49,732 million.

Royal Dutch Shell PLC Price, Consensus and EPS Surprise

Royal Dutch Shell PLC Price, Consensus and EPS Surprise | Royal Dutch Shell PLC Quote

Segmental Performance

Upstream: Upstream segment recorded a profit of $540 million (excluding items) during the quarter, turning around from the $1,437 million (adjusted) loss in the year-ago period.

This primarily reflects the impact of a rise in production on the back of contribution from the BG assets, higher oil and gas realizations, reduced depreciation charges and better operational performance.

Shell's upstream volumes averaged 3,011 thousand oil-equivalent barrels per day (MBOE/d), 6% higher than the year-ago period. While crude oil production increased 9%, natural gas output was up 3% - thanks to the contribution from BG Group that was acquired last year. Liquids contributed approximately 56% to Shell's total volumes, while natural gas accounted for the remaining portion.

Apart from the obvious BG role, production during the quarter compared with the year-ago quarter included volumes from new field start-ups and continued ramp-up of existing fields - particularly Kashagan in Kazakhstan, Lula and Lapa projects in Brazil, the Stones development in the Gulf of Mexico and Sabah Gas Kebabangan in Malaysia - that boosted output by roughly 142 MBOE/d and more than offset the impact of field declines.

Shell's worldwide realized liquids prices were 64% above the year-earlier levels while natural gas prices were up 10%.

Downstream: In the downstream segment, the Anglo-Dutch super-major reported adjusted income of $2,489 million, 24% more than the $2,010 million earned in the year-ago period. The positive comparison reflects the impact of stronger results from chemicals and refining operations, improved operational performance and lower costs, partly offset by lower contributions from trading.

Integrated Gas: The Integrated Gas unit reported adjusted income of $1,181 million as against $994 million in Jan-Mar quarter of 2016. Results were favorably impacted by increase in commodity prices, higher LNG volumes and a fatter trading contribution. Partly offsetting these factors were lower liquids output, accounting reclassification regarding its 13.6% stake in Australia's Woodside Petroleum and increased taxation.

Cash Flow

During the quarter under review, Shell generated cash flow from operations of $9,508 million, returned $3,900 million to shareholders through dividends and spent $4,720 million on capital projects.

Balance Sheet

As of Mar 31, 2017, this Zacks Rank #5 (Strong Sell) company had $19,595 million in cash and $91,629 million in debt (including short-term debt). Net debt-to-capitalization ratio was approximately 27.2%.

Share Performance

Shares have risen 1.8% over the past six months, outperforming the Zacks categorized Oil & Gas - International Integrated industry's 0.4% gains. Over the last 12 months, Royal Dutch Shell stock is up by 3.5%.

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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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