Joining rivals BP, Exxon Mobil, Chevron and Total in reporting better-than-expected first quarter profits, Shell said underlying earnings on a current-cost-of-supply basis rose to $3.8 billion from $1.6 billion in the first three months of 2016.With crude prices now more than 50 per cent higher than a year ago, Shell’s upstream business, which includes exploration and production, notched up a $540 million profit, compared with a $1.4 billion loss a year earlier. The downstream business, which includes refining, saw underlying profits rise 24 per cent to $2.5 billion.

Better market conditions

“We saw notable improvements in upstream and chemicals, which benefited from improved operational performance and better market conditions,” said chief executive Ben van Beurden, who described the start of 2017 as a “strong quarter for Shell”.Mr van Beurden said that the group’s takeover last year of smaller rival BG Group was starting to pay off. “The strategy we have outlined to deliver a world-class investment case is taking shape. Following the successful integration of BG, we are rapidly transforming Shell through the consistent and disciplined execution of our strategy.”

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Cost-cutting measures pay off

Over the past three years, Shell has saved more than $1 billion through cost-cutting measures but Mr van Beurden said the company would be making $25bn worth of investments this year in new oil and gas projects.“Challenges still remain about the sustainability of dividends in the oil and gas sector, as well as future demand; however, Shell appears to have taken a significant step forward in assuaging the concerns of its own shareholders about its cash pay-out in the short term at least,” said Michael Hewson, chief market analyst at CMC Markets UK.Nicholas Hyett, analyst at Hargreaves Lansdown, added, “It’s been some time since reading a set of oil results could be described as a pleasure, but today, Shell’s fit the bill.“The improvement in upstream was to be expected given the oil price environment, and was actually slightly behind consensus, but the strong cash flow and lower debt are a pleasant surprise.“Shell’s fortunes remain exposed to the oil price, of course, and capital expenditure has been slashed. That can’t last forever, but today’s numbers suggest Shell is well on the way to recovery.”Get access to our free Global Mobility Toolkit

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