Back to black: Shell ups dividends after posting $1bn profits

Shares in Royal Dutch Shell enjoyed an early surge today as the group rewarded investors after beating City expectations with third-quarter profits of nearly $1billion (£734million).

The Anglo-Dutch energy giant, which in April slashed shareholder payouts for the first time since the Second World War, upped dividends by 4% to 13p a share.

A return into the black after the second-quarter’s £14billion rout was seen as a positive despite representing a fall of 80% from £4.7bn in the same period in 2019.

Stuart Lamont, investment manager at Brewin Dolphin, said: “On the face of it, there is a positive direction of travel here that should go some way towards assuaging concerns about Shell’s long-term direction of travel.”

Shell said its adjusted earnings were $1 billion (£734 million) in the third quarter, significantly better than the $146 million (£112million) analysts had forecast.

Cash flow from operating activities was $10.4 billion (£8 billion), down 15% from the same time last year. Free cash flow hit $7.6billion (£5.9 billion).

It said lower oil prices and a collapse in refining margins were partially offset by well write-offs and record incomes from its vast network of petrol station forecourts and shops, which came in higher than 2019.

Oil giants have faced a double challenge this year, dealing with the pandemic’s plunging oil prices, some of which briefly turned negative in April, and mounting pressure to meet new environmental goals.

Shell, and UK rival BP, have both pledged to lower emissions to net zero by the middle of the century.

Last month, itt announced plans to cut up to 9,000 jobs, some 10% of the 83,000-strong workforce, with the axe falling on its upstream division, signalling a move away from drilling.

It announcing it would cut back its oil refineries from 14 sites to six “energy and chemical parks”, including one in the North Sea.

In an upbeat presentation to shareholders this morning, chief executive Ben van Beurden said that while “we are not out of the woods yet” the company feels confident that steady dividend growth can continue long-term.

Of April’s dividend cut, he said: “It was one of the counter-measures we felt we had to take at the time when we had so little visibility of what was going to happen next.”

He added: "We must continue to strengthen the financial resilience of our portfolio as we make the transition to become a net-zero emissions energy business.”

David Kimberley, an analyst at Freetrade, said: “Undoubtedly, we are moving towards a renewable future. But this is not going to happen overnight and claims that the pandemic has accelerated this process seem misplaced and overly optimistic.

“It’s worth remembering that there was a dip in energy usage and similar claims about a green future after the last financial crisis.

“Instead we got a decade of sustained growth in hydrocarbon usage. With demand for electricity in most European countries back to pre-pandemic levels and cheap oil on the market, it’s unlikely the predicted green future is going to be appearing any time soon.”

It comes after rival BP reported a surprise return to quarterly profitability on Tuesday after an uptick in fuel sales and oil prices.

Shell shares were up around 24p, or 2.7 per cent, at 890p in early trading this morning.