The Energy Report
Source: The Energy Report 11/03/2016
Despite depressed oil prices, Royal Dutch Shell Plc announced strong Q3/16 earnings on Nov. 1. The company attributes the gains, in part, to the now-completed integration of BG Group Plc, which it acquired in February.
“Royal Dutch Shell Plc’s (RDS.A:NYSE; RDS.B:NYSE) biggest takeover, the subject of intense investor scrutiny during crude’s collapse, is starting to pay off as Europe’s largest oil company chalks up its highest profit in five quarters,” Bloomberg reported after Shell released its Q3 results on Nov. 1.
“Royal Dutch Shell has cheered investors with a $1.4bn (£1.1bn) profit for the third quarter, as the takeover of BG Group boosted production and it rebounded from a massive $6.1bn loss caused by writedowns in the same period last year,” energy editor Emily Gosden wrote in the Telegraph on Nov. 1.
The Bloomberg report went on to describe how, following the acquisition, Shell’s “third-quarter results show that higher production, deeper cost cuts and tighter spending are boosting the bottom line.”
“Gearing at the end of the third quarter 2016 was 29.2% versus 12.7% at the end of the third quarter 2015. This increase mainly reflects the impact of the acquisition of BG,” Shell stated in its press release.
According to Bloomberg, Shell CFO Simon Henry stated that the company’s Q3 production is up 25% over the previous year, to 3.6 million barrels of oil equivalent per day. BG has “ramped up” production to about 800,000 barrels a day.
Bloomberg also quoted analyst Oswald Clint of Sanford C. Bernstein & Co.: “Investors can finally see what the new Shell can do. . .the BG acquisition is finally delivering.”
According to the Telegraph article, “Analysts at Barclays said strong cashflow, combined with the reduced operating and capital expenditure and divestments, ‘should prove enough to reassure investors that Shell is well on its way to resetting the business post the BG deal.’”
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