Reaction: Oil giant Shell suffers profit slump but still banks £12 billion

Royal Dutch Shell has suffered a hefty fall in full-year profits after lower oil prices and charges sent earnings crashing 88 per cent in the final three months of 2019.

Thursday, 30th January 2020, 8:38 am
Chief executive Ben van Beurden highlighted a competitive cash flow performance during 2019. Picture: Eric Piermont/Getty Images

The oil major reported a 36 per cent drop in earnings attributable to shareholders to $15.3 billion (£11.8bn) for the whole of 2019.

Big falls in the cost of crude and a large impairment charge hit its fourth-quarter results, with earnings plunging to $871 million (£670m) against $7.3bn a year earlier.

Chief executive Ben van Beurden told investors: “The strength of Shell’s strategy and portfolio has enabled delivery of competitive cash flow performance in 2019 despite challenging macroeconomic conditions in refining and chemicals, as well as lower oil and gas prices.

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“We generated $47bn in cash flow from operating activities excluding working capital movements and distributed over $25bn in dividends and share buybacks to our shareholders.”

Lower oil prices were expected to hit the results while Shell, which remains a key player in the North Sea, had already warned last month that annual figures would be hit by an impairment of up to $2.3bn for the year.

The group said on an underlying basis current cost of supplies earnings dropped 23 per cent to $16.5bn, with the fourth-quarter result down 48 per cent.

It booked the biggest charge in its upstream arm, with a $1.6bn hit for unconventional gas assets in the US, as well as a host of other charges across the business.

Shale

The figures come after oil and gas rivals including BP and Chevron have written down billions of dollars worth of shale assets in recent months.

Shell launched the next tranche of its $25bn share buyback programme, having already bought back nearly $15bn so far. It pledged to complete the programme but Van Beurden warned that the pace of buybacks would be “subject to macro conditions and further debt reduction”.

The blue chip giant announced a fourth-quarter shareholder dividend payout of 0.47 cents (36p) a share, unchanged on a year earlier, meaning total divi payouts reached $3.7bn in the three months.

Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said: "Investors in Royal Dutch Shell were braced for bad news and the company’s results are largely worse than expected against a highly challenging macro-economic backdrop.

"The good news, however, is the continuation of the share buyback programme – a cautionary note in the last management statement had shareholders worried it would be slowed. This news will likely be met positively by investors and provide some comfort against Royal Dutch Shell’s fall in profits."

Richard Hunter, head of markets at Interactive Investor, said: "Shell foresaw a difficult period of trading in 2019 when it issued a profit warning in December and this has indeed come to pass.

"The weakness in oil and gas prices is, of course, a major contributor to the weakness, while the general macro environment remains a serious challenge.

"More positively, Shell’s record over the last turbulent few years has been one of financial housekeeping on a truly industrial scale."

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Oil giant Shell extends share buyback as profits slip