Commodity Comment: Shell Outlines Dividend Cut, Coronavirus Impact
April 30 2020 - 6:37AM
Dow Jones News
By David Hodari
Royal Dutch Shell PLC, one of the world's largest oil and gas
companies, released its first quarter 2020 results Thursday. The
company cut its dividend for the first time since World War II
after first-quarter profits fell by nearly half as the coronavirus
pandemic hit.
Oil demand and crude prices have collapsed in recent months with
coronavirus-driven lockdowns suffocating transport and industrial
activity. Here are some more remarks from Shell's report:
On Earnings:
"[Current cost of supplies] earnings attributable to
shareholders excluding identified items were $2.9 billion,
reflecting lower realised oil, gas and LNG prices, weaker realised
refining and chemicals margins as well as lower sales volumes,
compared with the first quarter 2019."
Chair of the Board Chad Holliday on shareholder returns:
"Given the risk of a prolonged period of economic uncertainty,
weaker commodity prices, higher volatility and uncertain demand
outlook, the Board believes that maintaining the current level of
shareholder distributions is not prudent. Following the
announcement not to continue with the next tranche of the share
buyback programme, the Board has also decided to reduce the first
quarter 2020 dividend and reset to 16 US cents per share."
On Gas projects:
"During the quarter, Shell announced that it will not proceed
with the proposed Lake Charles LNG project due to the current
market conditions. Accordingly, Energy Transfer will take over as
the project developer. In April, Shell took the final investment
decision to develop the first phase of Arrow Energy's (Shell
interest 50%) Surat Gas Project in Queensland, Australia, which
will bring up to 90 billion cubic feet per year of new gas to
market at peak production."
On Gas performance:
"Compared with the first quarter 2019, Integrated Gas
earnings... primarily reflected lower realised LNG, oil and gas
prices as well as lower contributions from trading and optimisation
and higher depreciation, partly offset by favourable movements in
deferred tax positions and higher LNG sales volumes."
"Total production increased by 12% mainly due to lower
maintenance activities and field ramp-ups in Trinidad and Tobago
and Australia. LNG liquefaction volumes increased mainly as a
result of lower maintenance activities and new LNG capacity, partly
offset by lower feedgas availability compared with the first
quarter 2019."
"Cash flow from operating activities... mainly reflected lower
cash earnings, partly offset by higher cash inflows related to
commodity derivatives."
On Upstream:
"Compared with the first quarter 2019, Upstream earnings...
reflected lower realised oil and gas prices as well as lower total
production volumes. Earnings were also negatively impacted by lower
sales volumes associated with the timing of liftings... total
production was 5% lower, mainly due to divestments, field decline
and lower production in the NAM joint venture..."
On Oil Products:
"Products earnings excluding identified items reflected weaker
realised refining margins and lower contributions from crude oil
trading and optimisation as well as unfavourable movements in
deferred tax positions."
On Refining & Trading:
"Earnings... reflected lower realised refining margins and lower
contributions from crude oil trading and optimisation, partly
offset by lower operating expenses, compared with the first quarter
2019."
Write to David Hodari at david.hodari@wsj.com.
(END) Dow Jones Newswires
April 30, 2020 06:22 ET (10:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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