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This was the quarter that
Royal Dutch Shell
showed investors the money.
Third-quarter earnings were up 51 percent from a year earlier, while current-cost-of-supplies were down 60 percent. Still, overall production was down for the second quarter in a row, shouting out of the shell. . Shell's shares were down 1.7% in midday trading in London on Thursday.
The return to strong cash generation from the core business, after year-over-year falls in the first two quarters, removes one big investor concern. The price of oil in the second quarter of the year was mostly about 20%. This quarter, Shell managed to raise cash flow with an additional $ 1.7 billion needed for inventory. That should reassure investors that Shell's big refining division is a millstone when oil prices are high.
Show me the oil.
Photo:
Jasper Juneen / Bloomberg News
Unfortunately the company did not do much to reassure on another big concern: production. Its output of liquids, including crude oil and natural-gas byproducts like ethane, was off 2% from a year earlier. Natural-gas production was down 1%. And overall production on an oil-equivalent basis was down 2%, the second consecutive year-over-year fall. Management cited maintenance in its integrated gas division-last quarter, gas output was 2%. And upstream output would have risen 4%, excluding divestments.
Rivals are not standing still. Total third-quarter output was up 8.6%. BP's was flat, but its underlying production-excluding divestments and entitlement impacts in its production-sharing agreements-was up 6.8%.
Shell is creating lots of cash again, but still struggling to balance shareholder payouts, cutting debt and investing for the future. New deep-water projects in the pipeline should help, but investors could do with the company's output soon again.
Write to Nathaniel Taplin at [email protected]
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