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Shell’s Income Increases Amidst Rising Oil Prices

Shell’s Income Increases Amidst Rising Oil Prices
The recent rise demand and price in the global oil and gas prices helped oil giant Royal Dutch Shell reporting a 42 percent increase in its profits during the first quarter of 2018.
$5.322 billion from a year ago was the reported net income that is attributable to shareholders based on the current cost of supplies (CCS) which is used by companies as a replacement for net profit. The figure excludes identified items. The consensus of analysts for the same figure was $5.277 billion and was provided by the company.

$3.754 billion was the net income for the company during the same period last year.

Some of the important takeaways of the first quarter results are as follows:
  • Compared to $3.8 billion in the last quarter, the company posted a net income attributable to shareholders (on a current cost of supplies basis and excluding identified items) of $5.3 billion
  • The company expended $5.183 million in capital investments during the first quarter of the current fiscal compared to $4.720 that was reported by the company for the same period a year ago.
  • A quarterly dividend at $0.47was maintained by the Anglo-Dutch oil company.
"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," CEO Ben van Beurden said in a statement.
Beurden said that the company has plans to repurchase shares between 2018 and 2020 worth at least $25 billion and the free cash flow outlook given by the company is in line with that figure even as the company is moving steadily ahead with its divestment program.
While there have been cautions sounded by executives of oil companies over uncertainties related to price of crude oil globally both in the short and long term, analysts expect global large oil companies to generate more revenues in 2018 following a long period of cutbacks in recent years,
"I think the problem with the numbers this morning is that the cash flow generation was disappointing. The earnings were very strong but it didn't get pulled through into cash generation," Jason Gammel, equity analyst at Jefferies said during a television interview.
There has been a drop of 3 per cent in the shares of Royal Dutch Shell.
In recent months there has been a dramatic improvement in the business environment for oil companies and Shell’s figures are being viewed in that backdrop. While there has been rallies of crude futures to multi-year highs, there is also signs of stabilization of the energy market.
The major factor for the recent increase in price of global crude has been attributed to the efforts of cuts in production to clear the global oil glut by major oil producing group OPEC and Russia. The cuts were initiate din January last year. The organization and other oil producers have decided to increase the time limit of the production cuts till the end of the current year.
In recent quarters, oil companies have been supported and oil prices have stabilized because of the cut moves.

Christopher J. Mitchell

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