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Shell sees cash flow rise to highest in over 2 years

Asset sales and cost cuts have helped the company pay down debt and boost profit

Royal Dutch Shell has reported a large rise in second quarter profits after the energy giant was boosted by higher oil and gas prices. (Photograph: Yui Mok/PA Wire)

Thu Jul 27 2017 - 07:57

Royal Dutch Shell’s cash flow from operations rose to the highest in more than two years as asset sales and cost cuts helped the company pay down debt and boost profit.

The consensus-beating second-quarter performance illustrates how Shell's $54 billion (€46 billion) takeover of BG Group last year, plus cost reductions, are paying off. Chief executive Ben Van Beurden has made reducing borrowings his top financial priority and the company's gearing, or net debt to capital, fell to the lowest since the end of 2015.

Oil majors including Shell are starting to reap the benefits of cost cuts made in response to the slump in crude prices three years ago. After the best first-quarter performance in years, profit growth for companies including Exxon Mobil and Chevron is expected to far outstrip the 8 per cent gain in benchmark Brent crude in the second quarter.

For Shell, rising earnings and falling debt also ease concern about the company’s ability to maintain its dividend as oil prices remain around $50 a barrel, half the level of 2014.

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Cash flow from operations rose to $11.3 billion from $9.5 billion in the preceding quarter. Gearing dropped to 25.3 per cent. Net debt fell a third straight quarter to $66.4 billion from $72 billion in March as the company sold assets from Canada to Australia as part of its $30 billion divestment program.

-(Bloomberg)

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