Shell Third-quarter earnings, beats forecasts

Oil titan Royal Dutch Shell reported better-than-expected results in its third-quarter on Thursday. It also announced its plans to raise shareholders’ dividends.

The oil giant reported adjusted earnings of $955 million for the quarter that ended September, compared to a net profit of $4.77 billion the same period a year ago, and adjusted earnings of $638 million in the 2020 second quarter.

According to a consensus by analysts, as compiled by Refinitiv, Shell’s net profit in the third quarter was expected to be $594 million.

After presenting the results, Shell said it plans to raise dividends for shareholders by about 4% to 16.65 U.S. cents for the 2020 third quarter and on an annual basis eventually. The recent global economic crisis caused by the coronavirus pandemic caused the oil giant to cut its dividend for the first time since World War II. The oil sector was one of the most hit of all sectors of the global economy, with oil prices falling to their lowest levels.

“Our sector-leading cash flows will enable us to grow our businesses of the future while increasing shareholder distributions, making us a compelling investment case,” said Ben van Beurden, CEO of Royal Dutch Shell, in a statement. “The strength of our performance gives us the confidence to lay out our strategic direction, resume dividend growth, and to provide clarity on the cash allocation framework, with clear parameters to increase shareholder distributions.”

Shell’s shares rose nearly 3% during early morning trading but were down more than 61% year-to-date.

According to Beurden, Shell plans to cut greenhouse gas emissions to net zero by 2050 or earlier, and the company is committed to continuously strengthen its “financial resilience” of its portfolio. As a result, it would reduce its refining portfolio to 6 energy and chemical parks, down from 14 sites presently.

“The Board has reviewed Shell’s recent performance and its plans to grow its businesses of the future, and we are confident that Shell can sustainably grow its shareholder distributions as well as invest for growth,” said Chad Holliday, chair of the Shell board, in a statement.

He added that the board had also “approved a cash allocation framework for Shell which, on reducing its net debt to $65 billion, will target total shareholder distributions of 20-30% of cash flow from operations.”

With new cases of the coronavirus emerging in Europe, some countries are planning another lockdown, especially as winter approaches. As a result, there are looming uncertainties concerning the prospects of oil demand recovery.

On Thursday morning, international benchmark Brent crude futures traded at $38.99 a barrel, down 0.3% for the session. U.s West Texas Intermediate futures traded at $37.30, down 0.25%. Oil prices are down nearly 40% year-to-date.

Some oil companies have begun to show signs of a financial recovery, as seen with oil giant BP which posted profits for the third quarter, earlier this week. However, the company said the impacts of the ongoing coronavirus pandemic were likely to “continue to create a volatile and challenging trading environment.”