(Adds analysts, figures, share price, background)
By Dmitry Zhdannikov
LONDON, April 30 Royal Dutch Shell
capped a strong first quarter reporting season for oil majors
with better-than-expected results which were boosted by gas
earnings, while shareholders were rewarded with a higher
Shares in the company were up more than 3 percent at 1303
GMT to be among the top performers in the FTSE 100.
Shareholders have urged big oil companies such as BP
and Shell to control spending and give back cash because of
concerns over rising costs in the oil and gas industry. Shell is
planning to divest $15 billion worth of assets in 2014/15 to
improve profitability and payouts.
The company said on Wednesday its cash flow increased to $14
billion from $11.6 billion in the first quarter of 2013 and $6
billion in the fourth quarter of 2013.
That allowed the oil major to announce a first-quarter 2014
dividend of $0.47 per ordinary share, an increase of 4 percent
Adjusted earnings, stripping out $2.9 billion of writedowns
mainly related to refineries in Asia and Europe, beat consensus
estimates by 51 percent, but were still down 3 percent from a
year ago to $7.33 billion.
The first quarter reporting season for oil majors also saw
rival BP raising its dividend for the second time in six
months, Norway's Statoil beating
expectations, Eni reporting results in line
and France's Total disappointing with
a profit drop.
"We expect Big Oil to make a comeback in 2014," said
analysts at Barclays, including Lydia Rainforth.
Shell, which disappointed the market earlier this year with
a rare profit warning, said the bulk of its writedown in
downstream on Wednesday was related to the Bukom oil refinery in
Singapore. The firm said its first quarter upstream earnings
were supported by stronger gas results, offset by the impact of
exploration well write-offs, and higher costs and depreciation.
The first quarter also saw new profitable production from
the deep-water Gulf of Mexico and Iraq fields, together with new
LNG from the acquisition of Repsol's portfolio.
"A busy divestment programme is in train, cash generation
remains high, cost savings and further financial efficiencies
have been identified, whilst the contributions from Shell's gas
businesses in particular were robust," said Richard Hunter, head
of equities at Hargreaves Lansdown Stockbrokers.
"Less positively, oversupply in the industry, rising costs
on the back of increasingly difficult explorations, Shell's
exposure to Russia and generally lower margins all present
challenges," the analyst said.
Analysts at Investec cautioned that Shell's first quarter
usually carries seasonally lower costs and stronger results.
"While this is a good start, we would caution against
'over-extrapolation'," said analysts at Investec.
Shell first-quarter earnings, on a current cost of supplies
basis, were $4.5 billion compared with $8.0 billion for the
first quarter 2013.
"The impairments we have announced today in downstream
reflect Shell's updated views on the outlook for refining
margins," Chief Executive Ben van Beurden said. "There are
substantial pressures on the industry from excess capacity,
changing product demand, and new oil supplies from liquids-rich
Earlier this year, Shell announced it was divesting refining
and marketing businesses in Australia, Italy, Denmark and
(Reporting by Dimitry Zhdannikov; Editing by Larry King and