Oil major Royal Dutch Shell (RDSB) is up 3.6% to £23.67 as its results for the fourth quarter of 2018 break a recent habit of missing expectations. The company also reports its best annual set of numbers in four years with profit up 36%.
Net income attributable to shareholders on a current cost of supplies (CCS) basis, the company’s measure of net profit, and excluding identified items, came in at $5.7bn for the fourth quarter. This compares to a company-provided analyst consensus of $5.28bn.
And it even represents an increase on the third quarter when the same metric came in at $5.6bn. The company's integrated gas business and refining and marketing arms did the heavy lifting, perhaps unsurprisingly given the fall in oil prices in the final months of 2018.
The company is also generating plenty of cash flow, enough to fund its generous dividends and buybacks as well as reducing debt. Royal Dutch Shell has kicked off the latest part of its $25bn buyback.
A MORE EFFICIENT SHELL
The results are a testament to the work the company has done in the wake of the 2014 oil crash to streamline its operations and reduce costs.
AJ Bell investment director Russ Mould says: 'Oil major Royal Dutch Shell managed to break its losing streak in the fourth quarter despite the fall in oil prices.
'Every other quarterly set of figures for 2018 saw Shell come in short of expectations. But not this time.
'A longer-term concern for shareholders will be a significant drop-off in reserves replacement. In 2018, the company only added around half the number of barrels in new reserves as it pumped out of the ground - though this was affected by the mothballing of its Groningen natural gas field in the Netherlands due to earthquake fears.'
The average reserve replacement ratio, showing how much of the produced oil and gas is replaced by new reserves, over the last three years is 96% compared with 53% in 2018.
However, on an 'organic' basis and stripping out the impact of the Groningen shutdown the figure would have been 98% according to investment bank Morgan Stanley.
