By Ron Bousso
LONDON (Reuters) - Royal Dutch Shell (LON:RDSa) on Thursday reported a 42 percent rise in first-quarter profit, its highest in over three years, boosted by higher oil prices and production.
Expectations are high for Shell to continue to generate strong profits and cash flow after the Anglo-Dutch company beat larger rival Exxon Mobil (NYSE:XOM) on both fronts in 2017 thanks to cost cuts and higher efficiencies.
The world's top oil companies are expected to generate more cash in 2018 than at any other time this decade after three years of cuts, but boards remain cautious amid uncertainty over near- and long-term prices.
"Shell's strong earnings this quarter were underpinned by higher oil and gas prices, the continued growth and very good performance of our Integrated Gas business, and improved profitability in our Upstream business," Chief Executive Officer Ben van Beurden said in a statement.
Shell in the fourth quarter scrapped its scrip dividend in a sign that it is confident of being able to maintain around $15 billion in annual dividend payments without resorting to borrowing after a three-year oil price downturn.
It plans to buy back $25 billion of shares by 2020 in order to offset the dilutive effect of the scrip and its $54 billion acquisition of BG Group.
It did not specify a time to start the program on Thursday.
After falling short of expectations in the previous quarter, Shell's cash flow from operations in the first three months of 2018 recovered to $9.43 billion, which was still slightly weaker from $9.5 billion a year earlier.
Free cash flow was little changed from a year earlier at $5.178 billion.
Net income attributable to shareholders, based on a current cost of supplies (CCS) and excluding identified items, rose to $5.322 billion, topping a company-provided analysts' consensus of $5.277 billion.
A year ago, net income was $3.754 billion.
Production grew by 2 percent to 3.839 million barrels of oil equivalent per day. Earnings for the segment almost tripled from a year earlier.
Income from the refining and marketing segment, known as downstream, weakened due to lower refining margins and plant availability.
Gearing, the ratio between debt and Shell's market capitalization was slightly lower from the end of 2018 at 24.7 percent by the end of March.
Brent crude oil prices in recent months have risen to $75 per barrel, their highest since late 2014.
Prices averaged around $67 a barrel in the first quarter, up nearly 25 percent from a year earlier.
