Royal Dutch Shell reported a near 50 percent 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.
Shell and most of its rivals are now able to generate profit even if oil prices return to about $50 a barrel and are once again focusing on growing their businesses. Oil prices averaged $52 a barrel in the quarter and are today above $60 a barrel.
BP said this week it was able to balance its books so far this year at $49 a barrel.
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 shares were little changed as of 0920 GMT.HURRICANE IMPACT
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 United States` refining capacity.
Shell`s chemicals segment, a key engine for its growth into the next decade, also saw profits rise by 20 percent from a year earlier.
"The numbers were strong. The downstream was the key driver again," said Iain Reid, analyst at Macquarie.
Third-quarter net income attributable to shareholders, based on current cost of supplies (CCS) and excluding exceptional items, was $4.1 billion,. That compared with $2.8 billion a year earlier and a company-provided analysts` consensus of $3.62 billion.
Oil and gas production in the quarter was up 2 percent at 3.657 million barrels of oil equivalent.
Cash flow from operations in the third quarter fell by 33 percent from the previous quarter to $7.58 billion 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 $10 billion in the quarter, securing Shell`s spending as well as its dividend payments, analysts said.
"The company is demonstrating the resiliency of its operating cash flow in a roughly $50 a barrel Brent environment, the dividend is being covered with free cash flow," said Jefferies analyst Jason Gammel.
Shell`s debt ratio versus company capitalisation, known as gearing, slightly rose to 25.4 percent from 25.3 percent the previous quarter.
That was still significantly lower than a peak of 29.2 percent reached in the third quarter of 2016 that followed the $54 billion acquisition of BG Group in February. Shell`s debt pile in the third quarter came to $68 billion.
Shell has sold or agreed to sell around $25 billion 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 $30 billion target by the end of next year.