Daily Mail: Shell’s profits rocked and share buy-back put in doubt as it’s hit by the slumping oil price

By HARRY WISE FOR THISISMONEY.CO.UK and PA

PUBLISHED: 12:19, 31 October 2019 | UPDATED: 12:27, 31 October 2019

Oil giant Shell has experienced a large fall in third-quarter profits due to weaker oil prices.

Earnings after stripping out fluctuating expenses fell 15 per cent to £3.7billion, well below estimates it might reach almost £5billion.

Shell was able to charge an average of £43.25 per barrel of oil it produced in the quarter, down from £52.69 in the same three months last year. It was even more than a dollar lower than the second quarter price.

This combined with slightly lower production, at 3.56million barrels of oil equivalent a day, to give the oil firm a bloody nose.

Chief executive Ben van Beurden said: ‘This quarter we continued to deliver strong cash flow 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.’

He added that the company plans to push ahead with a plan to buy back £19.4 billion in shares from investors. But efforts to reduce gearing – the relationship between the company’s equity and how much it has borrowed – might be blown off course.

‘The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25 per cent and completing the share buyback programme within the 2020 timeframe,’ he said.

Aside from Shell, other oil and gas companies like BP, Sinopec and Exxon Mobil have experienced falls in third-quarter profits.

BP’s profits fell 40 per cent to £1.8billion for the July-September period, compared to £3billion for the same quarter last year. Revenue also fell by nearly a quarter.

A combination of low oil and gas prices, and Hurricane Barry, which forced many of BP’s platforms in the Gulf of Mexico to temporarily halt production, hit the company’s profits. Total revenues dropped to £48billion.

Their chief executive Bob Dudley, 64, will stand down in February after the firm releases its annual results. He will be replaced by BP’s Upstream chief executive Bernard Looney. Looney first joined BP as a drilling engineer in 1991.

Russ Mould, investment director at AJ Bell, said oil companies have been ‘struggling’ recently, but unlike BP, Shell ‘did at least benefit from a strong contribution on the oil products trading side and from its liquefied natural gas business.’

‘Expectations were not set that high for Royal Dutch Shell’s third quarter results but they still had investors running scared as profit came in well below expectations and fell sharply year-on-year.

But he warned: ‘The company’s performance has been patchy for a while, notwithstanding the usual volatility in the oil market, and its second quarter numbers were also poor.’

Shares in Shell fell 3 per cent in early trading today.

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