The best Royal Dutch Shell (RDSB) could have been hoping for in its interim results was ‘better than expected’. It got that far, at least, with a $15.6bn (£11.9bn) loss on its preferred profit metric - earnings on a current cost of supply (CCS) basis - after incurring a $16.8bn impairment based on more pessimistic oil price forecasts. The impairment forecast had been up to $22bn.
The supermajor also saw a major decline in earnings outside of this non-cash charge because of the oil price crash. Underlying earnings were down 60 per cent year-on-year to $3.5bn in the half and 82 per cent for the June quarter, to $638m.
Shell cut both its operating expenses and capital spending by around $2bn in the half.
The trading arm was a key driver of the underlying result. June quarter earnings were 28 times that of the year before, at $1.5bn. For the half year it was 3.5 times the previous year’s performance, at $1.7bn.
In June, Shell announced it would take a $15bn-$22bn writedown on lower oil prices and refining margins out to 2023. BP (BP.) and Total (Fra:FP) made similar calls, with Total announcing $8.1bn in impairments on Thursday, largely in its expensive Canadian tar sands assets.
Chief executive Ben van Beurden said the cash flow number showed the business was sustainable. Panmure Gordon analyst Colin Smith said Shell done better than analysts expected in the June quarter. "The group looks on track to be delivering on the actions it has announced to position itself to meet the [low oil price]," he said.
Consensus estimates see 2020 free cash flow halving year-on-year to $11.8bn.
| ROYAL DUTCH SHELL (RDSB) | ||||
| ORD PRICE: | 1,202p | MARKET VALUE: | £ 94bn | |
| TOUCH: | 1195-1247p | 12-MONTH HIGH: | 2,641p | LOW: 890p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | NA | |
| NET ASSET VALUE: | 2,019ȼ* | NET DEBT: | 48% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2019 | 177 | 14.3 | 111 | 94 |
| 2020 | 93.4 | -23.3 | -233 | 32 |
| % change | -47 | - | - | -66 |
| Ex-div: | 13 Aug | |||
| Payment: | 21 Sep | |||
| £1=$1.28 *Includes $23bn in intangible assets or 297ȼ a share | ||||
