Shell increases its dividend for the second time in six months following a beat

A logo at a Royal Dutch Shell Plc gas station in Rotterdam

A logo at a Royal Dutch Shell Plc gas station in Rotterdam

Royal Dutch Shell posted marginally better-than-expected first-quarter earnings on Thursday, despite the oil prices and increasing expectations of a rebound in fuel demand.

Shell also increased its dividend by about 4%, the second rise in six months, as the oil major continues to convince investors that its financial position has improved. It comes on the heels of Shell slashing its dividend for the first time since World War II last April.

For the three months ended March 31, the Anglo-Dutch group posted adjusted earnings of $3.2 billion. This compares to $2.9 billion a year ago and $393 million in the fourth quarter of 2020.

According to Refinitiv, analysts estimated first-quarter adjusted earnings of $3.1 billion.

Royal Dutch Shell CEO Ben van Beurden said in a statement that the company had started the year “strongly” and was “ideally placed to benefit from recovering demand.”

Over the first three months of the year, net debt decreased by $4 billion, dropping to $71.3 billion.

Shell confirmed that the major winter storm that engulfed Texas in February had an overall effect on first-quarter adjusted earnings of approximately $200 million. It had previously warned that this was likely to be the case in an April 7 update.

Shell’s shares are up more than 9% year to date, after plunging nearly 40% in 2020.

Shell cautioned in its second-quarter outlook that continued “massive volatility” in economic conditions would have a detrimental effect on the oil and gas industry. The energy behemoth stated that sales rates may be affected and that it could be forced to curb oil and/or gas output.

“These interventions would almost certainly have a range of effects on our organizational and financial metrics,” Shell said.

Prices of crude oil

Last year, the oil and gas industry was thrown into a tailspin by the coronavirus pandemic, which coincided with a record fuel demand shock, plunging energy prices, unprecedented write-downs, and tens of thousands of job losses.

BP, the British oil giant, announced earlier this week that its first-quarter net profit had more than tripled, owing largely to “exceptional” gas marketing and trading output and higher commodity prices. It laid the groundwork for the energy giant to announce plans to begin repurchasing shares.

Oil prices have risen by about 30% since the start of the year, as optimism about a rebound in demand seems to have outweighed worries about the effects of increasing Covid-19 infections.

On Thursday morning, international benchmark Brent crude futures were trading at $67.66 a barrel, up about 0.6 percent for the day, while US West Texas Intermediate futures were trading at $64.24, up more than 0.5 percent.

OPEC and non-OPEC partners, a powerful producer alliance often referred to as OPEC+, reaffirmed strengthening market confidence this week by announcing intentions to maintain a phased easing of supply constraints in the coming months.

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