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Energy

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) Posts Smashing Q3 Earnings, Beats Estimates

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Delivering strong production results amid low oil prices, the Anglo Dutch company takes lead in the third quarter season

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) reported third quarter of fiscal 2016 (2QFY16) financial results before the market opened on November 01. The energy giant posted improved earnings and revenues and navigated through the commodity price crash strongly, even as low crude prices weighed down its financial performance.

NET INCOME

The Anglo Dutch oil giant posted adjusted net income of $2.79 billion for the quarter. This was considerably up from the net earnings of $1.77 billion in the same quarter last year while significantly up from the net income of $1.04 billion in the previous quarter. Consensus had expected net income for 3QFY16 to be around $1.78 billion but the company beat this estimate by a notable margin of 56.25%.

The company posted $0.7 earnings per share in 3QFY16, up from $0.56 earnings per share in the same period a year ago while from $0.26 per share in the previous quarter. The oil major succeeded in beating consensus expectations of $0.46 earnings per share by 49.89%.

REVENUES:

Revenues for the third quarter clocked in at $61.8 billion compared with $58.4 billion in the preceding quarter and $68.7 billion in the same quarter of last year. Analysts had expected Shell to post revenue of $56.16 billion for the quarter but it beat the estimate by a significant margin of 10.13%.

Cash and cash equivalents of the company stood around $8.5 billion in the third quarter while the asset sale proceeds amounted to $200 million. In addition, Shell estimates capital spending to range around $25 billion through 2017 at the bottom of its $25 billion to $30 billion guidance and lower than the current year’s $29 billion.

Smashing estimates while driving up output, Shell has indeed made a strong mark in the third quarter season. Expressing his contentment, CEO Ben van Beurden stated: “Shell delivered better results this quarter… but lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain”

The Country Caller believes that although the company executed strong results in the latest quarter, the uncovered dividend payout still remains a matter of concern. Amid the oil prices trading below $50 per barrel currently from $115 per barrel two years back, companies effectively paying today and not investing for tomorrow are at a high risk of liquidity. Shell having a history of never once suspending its dividend is exposed to the same risk.

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