Shell increases dividend as third-quarter earnings beat forecasts

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(CNBC) – Oil giant Royal Dutch Shell on Thursday reported better-than-expected third-quarter earnings and announced plans to increase its dividend to shareholders.

The Anglo-Dutch company reported adjusted earnings of $955 million for the three months through to the end of September. That compared with a net profit of $4.77 billion over the same period a year earlier, and adjusted earnings of $638 million for the second quarter of 2020.

Analysts at Refinitiv had expected third-quarter net profit to come in at $594 million for the third quarter.

Shell said it would raise its dividend to shareholders by around 4% to 16.65 U.S. cents for the third quarter of 2020 and on annual basis going forward.

It comes around six months after the oil major reduced its dividend for the first time since World War II, following a dramatic slide in oil prices amid the coronavirus crisis.

“Our sector-leading cash flows will enable us to grow our businesses of the future while increasing shareholder distributions, making us a compelling investment case,” Ben van Beurden, CEO of Royal Dutch Shell, said in a statement.

“The strength of our performance gives us the confidence to lay out our strategic direction, resume dividend growth and to provide clarity on the cash allocation framework, with clear parameters to increase shareholder distributions.”

Shares of Shell are down more than 61% year-to-date.

Oil prices
Shell has planned to reduce greenhouse gas emissions to net zero by 2050 or sooner, and CEO Ben van Beurden said the firm must continue to strengthen the “financial resilience” of its portfolio as it makes the transition.

As part of that plan, Shell said it would transform its refining portfolio to six “energy and chemicals parks,” down from 14 sites at present.

“The Board has reviewed Shell’s recent performance and its plans to grow its businesses of the future, and we are confident that Shell can sustainably grow its shareholder distributions as well as invest for growth,” Chad Holliday, chair of the Shell board, said in a statement.

In addition, Holliday said the board had “approved a cash allocation framework for Shell which, on reducing its net debt to $65 billion, will target total shareholder distributions of 20-30% of cash flow from operations.”

The results come as energy market sentiment remains subdued, with an upsurge in global coronavirus cases hampering the prospects of oil demand growth.

A wave of new Covid-19 infections in Europe has prompted some countries to impose fresh lockdown measures as winter looms.

International benchmark Brent crude futures traded $38.99 a barrel on Thursday morning, down around 0.3% for the session, while U.S. West Texas Intermediate futures stood at $37.30, around 0.25% lower.

Oil prices are down around 40% year-to-date.

Earlier this week, energy giant BP posted a small profit for the third quarter, but said the ongoing impacts of the coronavirus pandemic were likely to “continue to create a volatile and challenging trading environment.”

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