Shell Slows Buybacks As Commodity Prices Weaken -- Energy Comment

Royal Dutch Shell (RDS/A) said Thursday that it was cutting spending on share buybacks--a tool that major oil companies have deployed in recent years to improve their share price. The decision comes after sharp falls in oil and other commodity prices in recent months. Shell's shares hit a two-and-a-half-year low after the earnings release. Here are some other remarks from the report:

On fourth-quarter year-on-year changes:

"Earnings attributable to shareholders...reflected lower realized oil, gas and LNG prices, weaker realized refining and chemicals margins as well as negative movements in deferred tax positions, compared with the fourth quarter 2018. This was partly offset by stronger contributions from LNG trading and optimization."

On cash flow and dividends year-on-year:

"Cash flow from operating activities...reflected lower inflows related to commodity derivatives and lower cash earnings."

Chief Executive Ben van Beurden on buybacks:

"Our intention to complete the $25 billion share-buyback program is unchanged, but the pace remains subject to macro conditions and further debt reduction."

On integrated gas:

"Compared with the fourth quarter 2018, integrated gas earnings...primarily reflected lower realized LNG, oil and gas prices as well as higher operating expenses and depreciation, partly offset by stronger contributions from LNG, gas and power trading and optimization. Compared with the fourth quarter 2018, total production decreased mainly due to the transfer of the Salym asset into the upstream segment and divestments, largely offset by field ramp-ups in Australia and Trinidad and Tobago. LNG liquefaction volumes increased mainly as a result of additional capacity."

On upstream earnings:

"Compared with the fourth quarter 2018, upstream earnings...included negative movements in deferred tax positions, higher provisions related to restoration and decommissioning obligations, lower realized oil and gas prices, as well as higher well write-offs, mainly in Albania. These were partly offset by higher sales volumes associated with the timing of liftings."

On upstream production:

"Compared with the fourth quarter 2018, total production remained largely unchanged, mainly as field ramp-ups in the Permian, Gulf of Mexico and Santos basin were offset by the impact of divestments and field decline."

On oil products:

"Refining & trading earnings...reflected lower realized refining margins, partly offset by stronger contributions from oil products trading and optimization, mainly fuel oil, as well as lower operating expenses, compared with the full year 2018."

On the outlook for 1Q 2020:

"Cash capital expenditure for 2020 is expected to be at the lower end of the $24 [billion]-$29 billion range. Divestments are expected to amount to more than $10 billion over the 2019-20 period."

Write to David Hodari at david.hodari@wsj.com


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  01-30-20 0943ET
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