Shell beats Q3 expectations as profit jumps on refining

Royal Dutch Shell reported a near 50% rise in quarterly profits, driven by strong refining, while solid cash generation underscored the oil and gas company has adapted well to a world of low oil prices.The Anglo-Dutch company sharply boosted its cash generation in recent quarters as the effects of cost cuts and asset sales kicked in following chief executive officer Ben van Beurden’s preparations for “longer forever” oil prices following the 2014 downturn.“Shell’s three businesses all made resilient contributions to this strong set of results,” van Beurden said in a statement, referring to downstream operations, oil and gas.In a sign of a renewed emphasis on growth, last week Shell won half the blocks awarded in Brazil’s deepwater oil auction, where rivals BP and Exxon Mobil Corp also acquired blocks in a historic opening to foreign operators.Shell’s third-quarter earnings rose mostly due to a tripling of profits from the refining segment which benefited from a sharp rise in profit margins in the wake of Hurricane Harvey in late August which knocked out a quarter of the US’ refining capacity.Shell’s chemicals segment, a key engine for its growth into the next decade, also saw profits rise by 20% from a year earlier.Third-quarter net income attributable to shareholders, based on current cost of supplies (CCS) and excluding exceptional items, was $4.1bn. That compared with $2.8bn a year earlier and a company-provided analysts’ consensus of $3.62bn.Oil and gas production in the quarter was up 2% at 3.657mn barrels of oil equivalent.Cash flow from operations in the third quarter fell by 33% from the previous quarter to $7.58bn for the first time since the first quarter of 2016.The drop in cashflow was due to increases in value of inventories as oil prices rose from a year ago, Shell said.Excluding the capital build, cashflow was at $10bn in the quarter, securing Shell’s spending as well as its dividend payments, analysts said.Shell’s debt ratio versus company capitalisation, known as gearing, slightly rose to 25.4% from 25.3% the previous quarter.That was still significantly lower than a peak of 29.2% reached in the third quarter of 2016 that followed the $54bn acquisition of BG Group in February.Shell’s debt pile in the third quarter came to $68bn.Shell has sold or agreed to sell around $25bn worth of assets to help pay for the BG deal, including large portfolios in the North Sea and Canada.It appears on track to hit its $30bn target by the end of next year.