MOSCOW (MRC) -- Europe’s largest oil company Shell plc reported fourth-quarter earnings per ADS (on a current cost of supplies basis, excluding items - the market’s preferred measure - of USD1.66. The bottom line came in above the Zacks Consensus Estimate of USD1.40 and surged from the year-earlier quarter’s earnings of 10 cents per ADS, backed by stronger commodity prices, as per the company's press release.
Shell’s revenues of USD90.2 billion essentially doubled from fourth-quarter 2020 sales of USD45 billion.
Meanwhile, Shell repurchased USD1.7 billion of shares in the fourth quarter. The energy group also announced plans to buy back USD8.5 billion worth of shares in the first half of this year, including the recent pledge to return USD5.5 billion from the Permian sale proceeds.
Shell declared a fourth-quarter payout of 24 cents per share and expects to hike it by approximately 4% next quarter.
With the current conditions auguring well for the integrated energy stocks, Shell follows peers ExxonMobil and Chevron in benefiting from skyrocketing oil and natural gas prices.
Upstream: The segment recorded a profit of USD2.8 billion (excluding items) during the quarter, turning around from a loss of USD748 million (adjusted) reported in the year-ago period. This primarily reflects the impact of higher oil and gas prices, partly offset by lower volumes.
At USD73.49 per barrel, the group’s worldwide realized liquids prices were 80.3% above the year-earlier levels while natural gas prices more than tripled.
Shell’s upstream volumes averaged 2,161 thousand oil-equivalent barrels per day, down 8.9% from the year-ago period mainly due to the impact of divestments. Liquids production totaled 1,458 thousand barrels per day (down 5.1% year over year) and natural gas output came in at 4,080 million standard cubic feet per day (down 15.7%).
Oil Products: In this segment, the London-based super-major reported adjusted income of USD555 million, 2.8% higher than the year-ago period. The favorable comparison was due to the return to profitability for refining and trading, which offset lower sales volumes and refinery processing. Meanwhile, refinery utilization came in at 68%, down from 71% during the December-end quarter of 2020.
Integrated Gas: The unit reported an adjusted income of USD4.1 billion, jumping from USD1.1 billion in the October-December quarter of 2020. Results were primarily impacted by higher realized commodity prices and strong contribution from Shell’s LNG portfolio. On a somewhat bearish note, LNG liquefaction volumes decreased 3.3% from the fourth quarter of 2020 to 7.94 million tons. Meanwhile, total Integrated Gas production fell 1.6% year over year to 927 MBOE/d.
Chemicals: The segment recorded a loss of USD42 million (excluding items) during the quarter, compared to the year-ago earnings of USD381 million due to lower realized margins in base chemicals, unplanned turnaround activities and a fall in joint venture income.
Financial Performance: As of Dec 31, 2021, the Zacks Rank #2 (Buy) company had USD37 billion in cash and USD89.1 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 23.1%, down from 32.2% a year ago.
During the quarter under review, Shell generated cash flow from operations of USD8.2 billion, returned USD1.8 billion to its shareholders through dividends and spent USD6.2 billion cash on capital projects.
The company’s cash flow from operations increased 30% from the year-earlier level. Meanwhile, the group raked in USD10.7 billion in free cash flow during the fourth quarter compared to just USD882 million a year ago.
As MRC reported earlier, Royal Dutch Shell plc. said in November, 2021, that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant's costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MR''s ScanPlast report, Russia's estimated PE consumption totalled 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.