Royal Dutch Shell has reported a surge in 242 per cent leap in annual profits to £8.5 billion on the back of recovering oil and gas prices, and extensive cost cutting.

Shell’s strong financial performance

The Anglo-Dutch Company revealed that underlying earnings, which reflect day-to-day operations and strip out one-off costs, more than doubled to £11.2 billion.Shell’s performance was even more impressive given that it had to pay a $2 billion tax charge, which was offset by proceeds from asset disposals.Chief executive Ben van Beurden said, “2017 was a year of strong financial performance for Shell. A year of transformation, in which we showed we have what it takes to deliver a world-class investment case. We enter 2018 with continued discipline and confidence, committed to the delivery of strong returns and cash.“Our relentless focus on value, performance and competitiveness meant we were able to deliver $39 billion of cash flow from operations excluding working capital movements from our upgraded portfolio.” 

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Oil price recovery and global economic recovery

Aside from the recovery of the oil price, which hit a high of $70 a barrel recently amid output cuts by OPEC and Russia, the growing resurgence of the global economy has been helping all major oil producers.Additionally, has slimmed down upstream operations, offloaded non-core businesses and snapped up gas-focused BG Group in 2016 for £47 billion in a move designed to offset the effects of the weak price environment.In a statement, the company said, “Full-year earnings benefited mainly from higher realised oil, gas and liquefied natural gas prices, improved refining performance and higher production from new fields, which offset the impact of field declines and divestments.”Steve Clayton, a fund manager at Hargreaves Lansdown, said the results showed the company was “emerging leaner and healthier after a period of intense pressure for the energy sector”.He added, “Shell’s overall financial position is much improved from the dark days of 2015. The outlook for the current year will, as always, be much influenced by oil and gas price movements, but current levels are well above the 2017 averages, which bodes well.”

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