Royal Dutch Shell – Muddy Set Of Numbers, But Underlying Performance Is Strong

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Royal Dutch Shell – Muddy Set Of Numbers, But Underlying Performance Is Strong
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Royal Dutch Shell Plc (LON:RDSA) (LON:RDSB) reported total revenue in the third quarter of $61.6bn, up 37.7% year-on-year. That comes despite a modest decline in production and reflects a significant increase in oil & gas prices.

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Q3 2021 hedge fund letters, conferences and more

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However, profits fell from $177m a year ago to a $988m loss this quarter, as derivative losses in the Integrated Gas business more than offset progress in Upstream oil & gas production. Excluding the effect of these and other derivative movements, underlying profits more than tripled to $4.1bn, while underlying operating cash flow reached a record high.

The company announced a dividend of $0.24 per share, up 44.1% year-on-year although in line with the dividend announced last quarter.

The shares fell 1.0% in early trading.

A Look At Royal Dutch Shell's Earnings

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“These are a muddy set of results from Shell. The rapid swings we’ve seen in oil & gas prices over the last 18 months mean the group has had to take a large writedown in the value of the derivatives it took to out hedge itself against a further price fall. These have officially pushed the group into a loss for the quarter. However, the underlying numbers, and particularly the all-important cash flow numbers, are looking far more upbeat.

It’s a record quarter for operating cash flow driving a significant reduction in net debt. The imminent sales of the group’s US shale assets is set to strengthen the balance sheet still further while funding a bumper return to shareholders.

That’s given Shell the firepower to commit to halving its emissions from operations by 2030. Along with investment in hydrogen plants it’s clear evidence the group is taking steps towards a cleaner, greener future. However, with several oil & gas fields also approved in the quarter, investors shouldn’t kid themselves that Shell will stop being an oil & gas group any time soon. With oil prices where they are, that may be no bad thing for the bottom line.”


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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