Royal Dutch Shell outperformed analyst expectations in the third quarter of 2019, despite posting earnings for the period 15% down on the previous year.
The Anglo-Dutch oil major warned a “challenging” economic outlook may continue to impact near-term debt balancing and the pace of its $25bn share buyback programme.
Current cost of supply earnings attributable to shareholders stood at $4.8bn for the three months to September – down from $5.6bn in the same period of 2018 but better than analyst forecasts of around $3.9bn.
Cashflow from working operations was $12.9bn, which was little changed from the previous year and attributed by Shell to “lower earnings, higher pension contributions and lower dividends received”.
At the time of writing, share prices in the company had fallen around 3.8% in the day’s trading on the London Stock Exchange.
Low oil and gas prices impact Royal Dutch Shell earnings in third quarter 2019
Low oil, gas and LNG prices were attributed to the performance as well as weaker refining and chemicals margins, while trade tensions between the US and China have had an impact on market confidence.
Earlier this week, rival BP revealed a similar picture in its third quarter update, with weak oil and gas market conditions squeezing profit margins.
Barrels of Brent crude oil traded at an average of $62 during the three-month period, compared to $69 in the previous three months and $75 a year earlier.
Shell CEO Ben van Beurden said: “This quarter we continued to deliver strong cashflow and earnings, despite sustained lower oil and gas prices, and chemicals margins.
“Our earnings reflect the resilience of our market-facing businesses and their ability to capitalise on market conditions, including very strong trading and optimisation results this quarter.”
Shell’s $25bn share buyback continues, but market conditions cast doubt over timeframe
A share buyback programme was launched last year following Shell’s 2016 acquisition of BG Group for $54bn, with almost half of the planned $25bn buyback having already been completed.
Despite the uncertainty over the pace at which the scheme will proceed, the oil giant confirmed that it had launched the next tranche of the programme, with a maximum of $2.75bn to be returned to shareholders by 27 January.
“Our intention to buy back $25bn in shares and reduce net debt remains unchanged,” added van Beurden.
“The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback programme within the 2020 timeframe.”
Shell confirmed it will issue a third quarter dividend of $0.47 per share.
CFO Jessica Uhl added: “Our quarterly results have been influenced by challenging macro conditions and some operational shortfalls. But with the progress we are making to reshape our portfolio we continue to increase the resilience of our business.
“Despite the circumstances we delivered resilient earnings in our marketing business, and our trading and optimisation teams have clearly performed well this quarter.”
