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Shell shares plunge after worst results since oil price crash

Shell shares plunge after worst results since oil price crash

By Brian Donnelly Business Correspondent: 2 Aug 2019

SHARES in Royal Dutch Shell were down five per cent after it posted its worst financial results since the 2016 oil price crash.

The energy giant said the figures were influenced by lower oil and gas prices while analysts said wider global factors including the US and China trade stand-off played a part, and the firm said it would not take any British-flagged tankers to the Strait of Hormuz amid heightened tensions in the region.

Shell’s profits fell by more than a quarter in the three months to the end of June, as the lower prices weighed on earnings.

For the second quarter, earnings dipped 26 per cent to under $3.5 billion against the same time last year. In total, first half earnings dropped 13% to $8.8bn. The company said it had suffered from weaker pricing in the industry.

Total production increased by 4% in the second quarter to 3.6 million barrels of oil equivalent a day, but in the same period liquid prices were 8% lower and gas prices were down 13%.

Ben van Beurden, Shell chief executive, said: “We have delivered good cash flow performance, despite earnings volatility, in a quarter that has seen challenging macroeconomic conditions in refining and chemicals as well as lower gas prices.”

Dividends were left unchanged at 94 cents per share for the first half. Shares in the company were down more than 5%, or 130p to 2,472p in early trading, dragging on the FTSE 100 of which Shell is a major constituent.

The group also said it would launch the third tranche of its share buyback programme, with repurchases set to total $2.75bn over the next quarter. Since the launch of the share buyback programme in October, Shell has bought back 294 million ‘A’ shares for $9.25bn. The $25bn share buyback is expected to be completed by the end of next year.

READ MORE: Shell underlines appeal of North Sea for oil giant amid Brexit uncertainty

In June, Barclays chiefs also revealed plans to hand over $125bn to shareholders over five years, after selling non-core businesses.

David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Investors had been expecting a pay out from Royal Dutch Shell and it arrived through the $2.75bn extension of its share buyback programme.

“The oil major has returned large amounts of cash to shareholders in recent years, as it transitions towards a low-carbon future and a volatile trading environment.

“The latter has seen income and profits tumble at Royal Dutch Shell in the second quarter of 2019, which will be a concern for many watchers of the company – cash flow and gearing have also gone in the wrong direction and will be the other major areas to keep an eye on in the months ahead.”

READ MORE: Shell provides fresh boost for North Sea oil and gas industry

Analyst David Hunter, of Schneider Electric Global Solutions, said wider factors had an impact on the results.

He said: “Remember we are looking at quarter two figures and the reference point for Shell is the same quarter last year, so the oil prices on average in that quarter have been 15% lower than a year earlier and the gas prices have been significantly weaker as well.

“Shell has a significant interest in the gas side too, so it has hurt them. BP outperformed analysts’ estimates so in terms of estimates Shell probably underperformed on what the consensus was. There are other companies such as France’s Total and Eni of Italy and so on that have reflected lower profits largely because of the change in these wholesale energy markets.

“They (Shell) are not alone in being under pressure with regard to refining margins, they also had unplanned outages in Asia on the refining side, and with regard to petrochemicals that is a global industry very much exposed to the global trade and so what we’ve seen in recent times are concerns over the US-China trade talks dispute and generally macroeconomic weakness, we have seen a slow-down in Europe, and obviously concerns over Brexit. The petrochemical side is exposed to global trade and has taken a bit of a hit.”


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