Shell smiles home as 4Q earnings hits 147%
Oil giant Shell’s 4Q CCS earnings attributable to shareholders excluding identified items were $4.3 billion for the fourth quarter 2017.
This is an increase of 147 percent from the fourth quarter of 2016. The oil major said the result reflected increased contributions from all businesses, compared with 2016.
Worth noting, Shell’s fourth quarter results soared despite taking a non-cash charge of $2 billion related to the impact of the US tax reform legislation.
Full year earnings were $15.8 billion, up from $4.5 billion in 2016, due to higher realized oil, gas and LNG prices, improved refining performance and higher production from new fields, which offset the impact of field declines and divestments.
Royal Dutch Shell Chief Executive Officer, Ben van Beurden, said: “2017 was a year of strong financial performance for Shell. A year of transformation, in which we showed we have what it takes to deliver a world-class investment case. Our relentless focus on value, performance and competitiveness meant we were able to deliver $39 billion of cash flow from operations excluding working capital movements from our upgraded portfolio.
“We strengthened our financial framework during the year through an $8 billion reduction in our net debt, while our increased free cash flow generation gave us the confidence to cancel the scrip dividend programme in the fourth quarter, in line with what we said previously.”
“We reported strong earnings for the quarter underpinned by continued delivery momentum. Cash flow reflected higher tax payments and increased cash requirements in relation to our trading business. We enter 2018 with continued discipline and confidence, committed to the delivery of strong returns and cash.”
During the quarter, Shell and its partners announced the start of the extended well test at the Libra field in the Santos Basin in Brazil. Petrobras, the operator, announced that the Libra consortium had submitted the declaration of commerciality and signed a contract to charter the first production FPSO of Mero, which is the north-west block of Libra.
The FPSO has a capacity of 180 thousand boe/d and is expected to start production in 2021. Shell has a 20% interest in the consortium developing the Libra area. In December, Maersk Oil, as operator, announced the final investment decision for the redevelopment of the Tyra gas field in Denmark, which is expected to be completed in 2022. Peak production will be approximately 60 thousand boe/d. Shell holds a 36.8% interest in the Tyra field, which is part of the Danish Underground Consortium.
Upstream divestments completed during the quarter totalled some $3,254 million, which included the disposal of a package of UK North Sea assets and Gabon onshore interests.
In January 2018, Shell announced the final investment decision on the redevelopment of the Penguinsoil and gas field in the UK North Sea. Shell has a 50% interest in the Penguins field and peak production is expected to be 45 thousand boe/d. Shell also completed the purchase of the Turritella FPSO in the Stones development in the Gulf of Mexico.
Looking ahead, Shell expect that within its upstream business, compared with the first quarter 2017, Integrated Gas production volumes are expected to be positively impacted by some 210 thousand boe/d, mainly associated with Pearl, Gorgon and portfolio impacts.
Compared with the first quarter 2017, Upstream earnings are expected to be negatively impacted by a reduction of some 270 thousand boe/d associated with completed divestments, and positively impacted by some 40 thousand boe/d associated with lower maintenance activities. Earnings are expected to be positively impacted by 40 thousand boe/d associated with restored production in Nigeria; however, the security situation remains sensitive, Shell said.
Shell added that the production outlook for NAM in the Netherlands is subject to decisions on production volumes by the Dutch government following the earthquake in Zeerijp in January 2018.