Shell announces $5.3 billion income in its first quarter, surpassing expectations

Royal Dutch Shell PLC (NYSE: RDS) announced net income of $5.3 billion for the first quarter of 2019, a decrease of 2 percent from the same quarter last year, reflective of the crude oil market, but a significant improvement on the $4.5 billion expected by analysts.

The report, released prior to the opening of the stock market on May 2, had an immediate impact on the company’s stock. At 10:00 a.m. EDT, Shell class B shares were up to 2.45 percent to $65.56.

According to the company’s release, the income reflects lower “realized chemicals and refining margins, decreased realized oil prices and lower tax credits, partly offset by stronger contributions from trading as well as gas prices compared with the first quarter 2018.”

Cash flow from operating activities for the first quarter of 2019 of $8.6 billion included negative working capital movements of $3.5 billion, leading to cash flow from operating activities excluding working capital movements of $12.1 billion. Excluding working capital movements and a positive impact of $949 million related to the implementation of IFRS 16, cash flow from operating activities increased to $11.3 billion compared with $10.4 billion in the first quarter of 2018, mainly due to a higher cash-generative portfolio of assets.

“Shell has made a strong start to 2019, with the first quarter financial performance demonstrating the strength of our strategy and the quality of our portfolio of assets. The power of our brand, serving millions of customers every day, continues to be a differentiator,” CEO Ben van Beurden said. “Our integrated value chain enabled our Downstream business to deliver robust results despite challenging market conditions.The consistent financial performance across all our businesses provides confidence in meeting our 2020 outlook.”

Total dividends distributed to shareholders in the quarter were $3.9 billion. Today, Shell launches the next tranche of the share buyback program, with a maximum aggregate consideration of $2.75 billion in the period up to and including July 29, 2019. In aggregate, since the launch of the share buyback program, 215.7 million ordinary shares were bought back for cancellation for a consideration of $6.75 billion.

Looking forward, the company expects to deliver $25 to $30 billion in organic free cash flow from 2019 to 2021.