Lower oil and gas prices, weaker refining and chemicals margins and “challenging” economic conditions almost halved Royal Dutch Shell’s fourth quarter profits and forced the energy major to slow the pace of its share buyback programme. The Anglo-Dutch company said net income adjusted for cost of supply – its preferred profit measure – fell to $2.9bn in the three months to December This compares with $5.7bn in the same period a year ago and is below analysts’ consensus forecasts of $3.2bn. Full-year earnings for 2019 fell 23 per cent to $16.5bn. The group’s shares fell 3.3 per cent in early London trading.
Shell said on Thursday that it would slow investor payouts. It now plans to buy back $1bn of shares in the next quarter compared with $2.8bn in the fourth quarter of 2019. In 2018, it launched a $25bn buyback programme, which it had promised after its $54bn acquisition of BG Group in 2016 with a plan to complete it by the end of 2020. While Shell has made $15bn of share repurchases, chief executive Ben van Beurden noted a “challenging”economy and said the pace of buybacks “remains subject to macro conditions and further debt reduction”.
Earnings at the gas business fell 47 per cent to $1.9bn after higher trading activity failed to offset lower prices. The group’s exploration and production division reported a loss of $787m, compared with a profit of $1.6bn in the same quarter a year ago, because of lower oil prices, decommissioning costs and write-offs related to its business in Albania.
Shell reported production of 2.8m barrels of oil equivalent a day in the fourth quarter, in line with the same period a year ago. The downstream refining and chemicals business reported earnings down 64 per cent to just over $1bn as weaker margins hit profits. Shell had warned in December about “materially lower” margins amid a weaker global economy. Cash flow from operations fell 53 per cent to $10.3bn in the fourth quarter compared with a year ago. Free cash flow, which enables the company to pay for dividends and share buybacks, dropped from $16.7bn to $5-4bn over the period.