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Shell’s Q1 Upstream Earnings Rose despite Tough Conditions

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Shell’s first-quarter performance

Royal Dutch Shell (RDS.A) released its first-quarter results on May 2.

In the first quarter, Shell’s revenues at $83.7 billion missed analysts’ estimates. In the first quarter, Shell’s adjusted EPS was $1.30—compared to its estimated EPS of $1.05, which beat analysts’ estimate. Shell’s first-quarter adjusted EPS fell 2% YoY (year-over-year).

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Earnings review

Shell’s reported earnings rose from $5.9 billion in the first quarter of 2018 to $6.0 billion in the first quarter. However, Shell’s adjusted earnings fell 2% YoY to $5.4 billion in the first quarter. The fall was led by an increase in corporate expenses due to lower tax credits. However, the earnings from all three business segments—including upstream, integrated gas, and downstream—rose in the first quarter, which is a favorable scenario.

Shell’s integrated gas earnings rose 5% YoY due to higher natural gas and LNG realizations. However, the integrated gas segment’s production volumes fell 12% YoY due to divestments and the transfer of an asset to the upstream segment.

In the first quarter, Shell’s upstream earnings rose 11% due to higher volumes and lower operating expenses. Shell’s upstream production rose 1% YoY due to higher output from North American assets and asset transfer.

Shell’s downstream earnings rose 3% YoY due to higher oil products—refining and trading and marketing earnings. The rise was partly offset by lower chemicals earnings. Oil products’ earnings were supported by higher trading activities—partially offset by lower margins.

Peers’ expected performance

ExxonMobil (XOM) and Chevron’s (CVX) adjusted EPS fell 50% YoY and 27% YoY, respectively, in the first quarter. Total (TOT) and BP’s (BP) adjusted EPS fell 6% YoY and 10% YoY, respectively, in the first quarter.

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