Shell has confirmed third quarter underlying quarterly earnings of $5.8bn, up 38% on the prior year.
While upstream results were strong, slower than expected progress in integrated gas meant group profit was marginally behind analyst forecasts.
The shares fell 2.9% on the news.
There's been a lot to like in Shell's recent results, with all the major metrics heading in the right direction. Profits may not be quite what was hoped for this time out, but that's a minor setback.
Having nursed the dividend through the bad times, Shell's now got the cash to reward shareholders for their loyalty, and is working through a $25bn buyback.
The driving force behind progress has been a dramatic improvement in oil prices, but Shell deserves credit too. Operating expenses have been kept under control, and the group has been managing capital expenditure while still adding more than enough to reserves to replace production last year.
But the real acid test is cash flow. Not for nothing do investment bankers say "cash is king".
Cash is what a company actually has in the bank to fund investment, service debt and pay dividends. Shell is a monster when it comes to cash generation, and quarterly operating cash flow is now easily covering the dividend and capex spend. In fact, it's able to fund the $2.5bn a quarter buyback and still have enough left over to pay down debt.
Shell's also undertaken a huge asset disposal programme, which saw the sale of $4.4bn of assets so far this year. All that extra cash has helped Shell cut net debt rapidly, and disposals are expected to tick along at similar levels going forwards.
There should be scope for more cost savings and production increases too. That would drive profits and free cash higher.
This all means Shell looks in increasingly good shape, and makes the prospective yield of 6.1% look attractive to us, despite a likely lack of meaningful growth.
Investors shouldn't forget all of the above comes with an asterisk attached. It's only a couple of years ago that the oil prices crashed to below $30 a barrel.
However, with brent hovering around $75, a return to those days looks some way off. Until that changes, Shell is sitting pretty.
Third quarter trading details (on a replacement cost basis)
Upstream performance was boosted by increased average prices (up 45% for global liquids and 16% for global natural gas), and a slight increase in production. That meant earnings rose to $1.9bn, up from $562m last year.
During the quarter Shell and Chevron won a 35-year production-sharing contract for the Saturno block, located off the coast of Brazil.
Integrated gas earnings rose 79% year-on-year to $2.3bn, but were broadly flat from Q2. Similarly to the upstream business, the division benefited from higher prices, but progress was checked by an 8% fall in year-on-year production.
Downstream profits fell 25% to $2bn. Performance was negatively impacted by adverse exchange rate movements, lower chemical volumes and weaker margins in the trading and marketing divisions.
Operating cash flow hit $12.1bn, up sharply on both Q2 and the equivalent quarter last year. Higher capital expenditure and the non-recurrence of over $1bn of proceeds from asset sales meant free cash flow dipped from $9.5bn in Q2 to $8bn. It was just $3.7bn in Q3 last year.
That cash flow helped net debt fall 12% year-on-year to $60.5bn and gearing, defined as net debt as a percentage of total capital, drop from 25.7% to 23.1%.
Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance.
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