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January 31, 2019updated 27 Jul 2020 2:06pm

Shell full-year 2018 profits soar by a third

Royal Dutch Shell reported full-year profits of $21.4bn, an increase of more than a third, in its fourth quarter 2018 results, published on Thursday.

By Umar Ali

Royal Dutch Shell reported full-year profits of $21.4bn, an increase of more than a third, in its fourth quarter 2018 results, published on Thursday.

The company saw cash flow from operations of $49.6bn excluding working capital movements for the full year. In Q4 2018, it reported $12.9bn of cash flow from operations excluding capital movements, $16.7bn of free cash flow and $5.7bn of earnings on a cost of supplies basis.

Shell cited higher released oil, gas and liquid natural gas (LNG) prices and stronger contributions from crude oil and LNG trading as contributing factors toward these profits.

Shell CEO Ben Van Beurden said: “Shell delivered a very strong financial performance in 2018. We delivered on our promises for the year, including the completion of the $30bn divestment programme and starting up key growth projects while maintaining discipline on capital investment.

“We paid our entire dividend in cash, further reduced our debt and launched our share buyback programme, with $4.5bn in shares repurchased so far. We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns. Our strategy to deliver a world-class investment case is working.”

Offshore projects started by Shell in 2018 include the second phase of the Clair Ridge project in the North Sea and the Prelude floating LNG facility in Australia, which had its first gas in from wells in 2019.

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Shell also completed the sales of its upstream assets in Ireland and its interests in the Draugen and Gjøa fields in Norway during Q4. In December, Shell and its partners renewed a number of onshore oil mining leases in the Niger Delta for 20 years.

GlobalData upstream oil and gas analyst Daniel Rogers said: “We expect Shell to follow up a strong quarter with upstream growth in 2019 and 2020. In 2019–2020 Shell should see the benefit of output ramp-ups in Australia and the Brazilian Pre-Salt, continued growth in the Permian basin, and start-up of Appomattox in the US Gulf of Mexico.

“Other major projects to look out for include final investment decision (FID) for the 600 million barrel (oil in place) Cambo field off the West of Shetland, plus expansion phases at the Mero (Libra Noroeste) oil field, offshore Brazil.”

Citywire senior market analyst Fiona Cincotta said: “Higher oil and gas prices in the fourth quarter of last year helped Royal Dutch Shell turn in a set of results that was better than expected. Earnings in the period to the end of December jumped up a dizzying 32% on the year, to $5.69bn from $4.3bn in 2017, particularly during the period when oil prices were whipped up into a frenzy ahead of the introduction of Iran sanctions.

Cincotta added: “The downside of this set of results is that, with oil prices moving lower in the meantime, the energy giant will have to work harder to keep earnings up.”

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