Europe’s largest oil company Royal Dutch Shell (LON:RDSa) plc (RDS.A) reported second-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.42. The bottom line came in ahead of the Zacks Consensus Estimate of $1.31 and dwarfed the year-ago profit of 16 cents per ADS.
The Hague-based Shell reported revenues of $$61.8 billion that surged 90.1% from the second-quarter 2020 sales of $32.5 billion.
The outperformances were mainly backed by stronger commodity prices.
Royal Dutch Shell hiked its quarterly dividend by 38.3% to 24 cents per share and launched a $2 billion stock repurchase program to be completed by the end of 2021. The company’s earnings and cash flows have been steadily improving on the back of higher crude realizations and a recovery in consumption.
Royal Dutch Shell PLC Price, Consensus and EPS Surprise
Royal Dutch Shell PLC price-consensus-eps-surprise-chart | Royal Dutch Shell PLC Quote
Operational Performance
Upstream: The segment recorded a profit of $2.5 billion (excluding items) during the quarter, turning around from a loss of $1.5 billion (adjusted) reported in the year-ago period. This primarily reflects the impact of higher oil and gas prices.
At $62.53 per barrel, the group’s worldwide realized liquids prices were 155.2% above the year-earlier levels while natural gas prices were up 123.3%.
Shell’s upstream volumes averaged 2,262 thousand oil-equivalent barrels per day (MBOE/d), down 6.3% from the year-ago period due to maintenance activities and seasonal impacts. Liquids production totaled 1,558 thousand barrels per day (down 3.2% year over year) and natural gas output came in at 4,082 million standard cubic feet per day (down 12.6%).
Oil Products: In this segment, the Anglo-Dutch super-major reported adjusted income of $1.3 billion, 46.1% lower than the year-ago period. The unfavorable comparison was due to higher operating expenses and lower refinery processing. Meanwhile, refinery utilization came in at 76%, up 6% from the June quarter of 2020.
Integrated Gas: The unit reported adjusted income of $1.6 billion, jumping from $362 million in the April-June quarter of 2020. Results were primarily impacted by higher realized commodity prices. On a somewhat bearish note, LNG liquefaction volumes decreased 10.4% from the second quarter of 2020 to 7.49 million tons. Meanwhile, the total Integrated Gas production increased 3.8% year over year to 938 MBOE/d.
Chemicals: The segment recorded a profit of $670 million (excluding items) during the quarter compared to the year-ago earnings of $206 million on the back of higher realized margins in base chemicals.
Financial Performance
As of Jun 30, 2021, the Zacks Rank #3 (Hold) company, which trimmed its payout for the first time since World War II in April last year, had $34.1 billion in cash and $100.1 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 27.7%, down from 32.7% a year ago.
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During the quarter under review, Shell generated cash flow from operations of $12.6 billion, returned $1.3 billion to its shareholders through dividends and spent $4.4 billion cash on capital projects.
The company’s cash flow from operations rocketed 392.3% from the year-earlier level. Meanwhile, the group raked in $9.7 billion in free cash flow during the second quarter, up significantly from a mere $243 million a year ago.
Guidance
Shell expects third-quarter 2021 upstream volumes of 2,100-2,250 MBOE/d, while Integrated Gas production is expected between 870 MBOE/d and 920 MBOE/d. The company also foresees Oil Products sales volumes of 4,300-5,300 thousand barrels per day, Chemicals sales volumes of 3,600-3,900 thousand tons and refinery utilization in the range of 73-81%.
Earnings Schedules of Other Oil Supermajors
Among the big integrated players, ExxonMobil XOM and Chevron CVX are scheduled to release tomorrow, while continental rival BP plc (LON:BP) BP (NYSE:BP) will come up with quarterly numbers early next week.
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