Shell lifts dividend, returns to profit in Q3

Royal Dutch Shell on Thursday unveiled a plan to increase dividends and cut debt as it swung to a small third quarter profit.

The energy giant lifted its dividend by 4% quarter on quarter to 16.65 cents a share. Adjusted earnings were $955m for the three months to the end of September, easily beating analyst forecasts of a $146m profit, but well below the $4.76bn recorded for the same period last year as global oil prices collapsed in the face of the Covid-19 pandemic.

Shell reported a $177m profit on a current cost of supplies basis, compared with a $18.4bn loss in the second quarter.

The company said it planned to reduce debt to $65bn from $73.5bn at the end of September and a target to distribute a total of 20-30% of cash flow from operations to shareholders.

Earnings were hit by lower for oil and liquefied natural gas prices, and weaker refining, partly offset by reduced operating expenses and better marketing margins. Gearing fell to 31.4% from 32.7% in the second quarter.

“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,” said chief executive Ben Van Beurden.

Shell cut its dividend in April for the first time since the second world war. The company also cut the value of its oil and gas assets, alongside many of its rivals, as market prices plunged in response to falling demand for transport fuels this year.

It reported another writedown of almost $1bn on its Australian gas project, Prelude, in its third-quarter results.

Steven Clayton, fund manager with Hargreaves Lansdown, said Shell was "doing a good impression of a contortionist, as it tries to reshape itself from being a major oil & gas producer, to a carbon-neutral energy company".

"At the same time, the weak demand environment is putting the pressure on. Quarterly profits were better than some feared, but when the overall result is an 80% drop in earnings, that’s a funny sort of win. But Shell are trying to get back on the front foot, after a year which has seen their share price slump, by setting out their stall to investors."

"It all hinges on a radical restructuring that will see the group focus down onto core assets, shedding billions of dollars of non-core businesses. If it can transform itself in the way it suggests then shareholders can look forward to a steady growth in income, from a stock that yields over 5%. The shares opened almost 4% higher on the news as the market welcomes Shell’s return to dividend growth.”