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Oil major Shell reports sharp drop in full-year profit, raises dividend

Oil major Shell reports sharp drop in full-year profit, raises dividend

Sam Meredith@SMEREDITH19
KEY POINTS
  • Shell reported adjusted earnings of $4.85 billion for the full-year 2020. That compared with a profit of $16.5 billion for the full-year 2019.
  • The company said it would raise its first-quarter dividend to $0.1735 per share, reflecting an increase of 4% from the previous quarter.
  • The results come as energy giants seek to reassure investors about their future profitability, following a dreadful year for the global oil and gas industry by virtually every measure.

LONDON — Oil giant Royal Dutch Shell on Thursday reported a sharp drop in full-year profit as the coronavirus pandemic took a heavy toll on the global oil and gas industry.

Shell reported adjusted earnings of $4.85 billion for the full-year 2020. That compared with a profit of $16.5 billion for the full-year 2019, reflecting a drop of 71%. Analysts polled by Refinitiv had expected full-year 2020 net profit to come in $5.15 billion.

For the final quarter of 2020, Shell reported adjusted earnings of $393 million, missing analyst expectations of $470.5 million.

The company said it would raise its first-quarter dividend to $0.1735 per share, an increase of 4% from the previous quarter.

Shell CEO Ben van Beurden described 2020 as an “extraordinary” year.

“We have taken tough but decisive actions and demonstrated highly resilient operational delivery while caring for our people, customers and communities. We are coming out of 2020 with a stronger balance sheet, ready to accelerate our strategy and make the future of energy,” van Beurden said in a statement.

Income attributable to Shell shareholders collapsed by 237% to a loss of $21.7 billion in full-year 2020, down from a profit of $15.8 billion in full-year 2019.

Shell said this was the first full-year headline loss since the unification of Royal Dutch Petroleum Company and Shell Transport & Trading Company to one parent company in 2005.

Energy supermajors endured a dreadful 12 months by virtually every measure in 2020 and the industry faces significant challenges and uncertainties as it seeks to recover.

Last year, the Covid pandemic coincided with a historic demand shock, falling commodity prices, evaporating profits, unprecedented write-downs and tens of thousands of job cuts.

Shell said it had reduced its net debt by $4 billion to $75 billion over the course of 2020.

Shares of the company are up more than 3% year-to-date, having plummeted over 44% last year.

2021 outlook

Shell’s results come as oil and gas giants seek to reassure investors about their future profitability, pointing to an expected upswing in fuel demand in the second half of the year and a mass rollout of Covid vaccines.

However, renewed lockdown measures and limited mobility worldwide amid the ongoing Covid-19 crisis has prompted some of Shell’s peers to warn of a tough start to 2021.

U.S. major Exxon Mobil reported on Tuesday that it had lost $20.1 billion during the most recent quarter, while U.K.-based oil and gas company BP posted its first full-year net loss in a decade.

International benchmark Brent crude futures traded at $58.81 a barrel on Thursday morning, up around 0.6%, while U.S. West Texas Intermediate crude futures stood at $56.08, more than 0.7% higher.

Oil prices have steadily improved since the start of the year, with WTI climbing to its highest level in more than a year in the previous session. Crude futures have been supported by ongoing production cuts and the mass rollout of Covid vaccines.

OPEC and non-OPEC partners, an oil producer group sometimes referred to as OPEC+, maintained their production policy on Wednesday, buoyed by rising oil prices.

The energy alliance said it was “optimistic” for a year of recovery in 2021.

SOURCE

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