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Shell’s Q4 Earnings Rose across Segments

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Shell’s fourth-quarter earnings: Upstream and Integrated Gas

Royal Dutch Shell (RDS.A) reported its Q4 2018 earnings on January 31, 2019. The earnings surpassed estimates. We discussed this in Shell Kickstarts Q4 Earnings with Strong Numbers, Beats Estimates. Now, let’s look at Shell’s segmental earnings performance.

Shell’s Upstream segment earnings rose from $1.7 billion in Q4 2017 to $1.9 billion in Q4 2018 on an adjusted basis. The Upstream earnings rose steeply due to the surge in crude oil realizations. Brent prices, which averaged $61 per barrel in Q4 2017, surged to $69 per barrel in Q4 2018. Further, Shell’s Integrated Gas earnings rose by 44% over Q4 2017 to $2.4 billion in Q4 2018 due to better realizations and stable volumes.

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In Q4 2018, the Integrated Gas segment’s hydrocarbon production stood stable at 1.0 million barrels of oil equivalent per day (or MMbpd). Hydrocarbon volumes held steady as the impact of divestments offset the rise in LNG liquefication volumes. However, the Upstream segment’s hydrocarbon production rose by 1.2% YoY to 2.8 MMbpd due to new field start-ups and ramp-ups. Overall, total hydrocarbon production rose 0.9% YoY to 3.8 million barrels of oil equivalent per day in Q4 2018.

Shell’s downstream earnings in the fourth quarter

Shell’s Downstream segment’s earnings rose by 53% over Q4 2017 to $2.1 billion in Q4 2018. This rise was due to stronger Refining & Trading and Marketing earnings partially offset by weaker Chemical earnings. Refining & Trading earnings rose due to better refining margins (especially in Canada) and higher trading activities. Also, Marketing earnings rose due to higher margins. Further, Chemical earnings declined due to weaker margins in base chemicals and intermediate products in Asia.

Shell’s peers

Shell’s peers ExxonMobil (XOM), Chevron (CVX), and BP (BP) could also see higher upstream earnings in the fourth quarter led by higher oil prices. Also, Chevron and BP’s hydrocarbon volumes could rise year-over-year in the fourth quarter.

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