Royal Dutch Shell has posted a 33pc jump in earnings, despite weathering a $1.9bn (£1.2bn) write-down due to disappointing performances from parts of the company's shale investments in North America.
The Anglo-Dutch giant has struggled to take advantage of the booming US shale sector as smaller, more agile competitors outmanoeuvre the oil majors. Earlier this year itannounced it would cut spending on shale by a fifth and exit several ventures. It said its remaining 48 so-called dry gas investments "remain under review" as it turns its focus to liquids-rich shale in Western Canada and the Permian basin that spans western Texas and New Mexico.
Shell nonetheless smashed analysts' expectations by unveiling earnings of $6.1bn for the second quarter of the year, up a third from the same period a year ago. Analysts had expected earnings of $5.46bn.
The strong results were largely due to a stronger than expected quarter for Shell's exploration, or upstream, business, which posted earnings of $4.7bn, compared with forecasts for $4.3bn.
Downstream earnings also exceeded expectations, with profits of $960m, well above analysts' expectations of $796m.
It also raised its quarterly dividend and said the value of its share buybacks and dividends for 2014 and 2015 would exceed $30bn.
However its 4pc increase to the second quarter dividend to $0.47 per ordinary share disappointed some analysts, with Justin Cooper of Capita Asset Services saying it would "underwhelm" investors, "especially given the big jump in profits".
Ben van Beurden said the results showed his strategy to refocus the business after years of profligate spending was starting to pay off, but added that the plan had longer to run.
Royal Dutch Shell ‘B’ remains one of the three largest holdings in my personal portfolio, and I post this article knowing that a number of subscribers also own this conservative, high-yielding share which is listed in several currencies. It tested our patience for a few years but has been steadily improving since Ben van Beurden took over as Chief Executive Officer last year. Shell currently has an estimated p/e of 11.31 and yields 4.36%, according to Bloomberg. I have occasionally added to this position on pullbacks and the chart looks promising in terms of its medium-term outlook.Back to top