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Shell Raises Dividend As Q1 Earnings Jump On Higher Oil Prices

Shell (NYSE: RDS.A) reported on Thursday a surge in adjusted earnings for the first quarter and lifted its dividend by 4 percent as higher oil and gas prices and demand drove profits higher.

Shell reported adjusted earnings of $3.23 billion for the first quarter of 2021, a surge from the $393 million earnings for the fourth quarter of 2020, and a rise from the Q1 2020 earnings of $2.86 billion.

The expected and previously announced dividend increase is the second small dividend hike at Shell, which this time last year had slashed its dividend for the first time since World War II to preserve cash and value in a highly uncertain macroeconomic environment in the pandemic. 

A year after the coronavirus roiled global oil markets and prices and forced supermajors such as Shell and BP to cut their dividends, the major international oil firms are reporting solid profits for the first quarter of 2021, thanks to higher oil prices, slightly better refining margins, and profitable trading business.  

Shell also reported a 32-percent rise in cash flow from operating activities (CFFO) at $8.294 billion for the first quarter of 2021, up from $6.287 billion for the fourth quarter of 2020. The supermajor also managed to reduce is net debt to $71.3 billion at end-March 2021, down from $75.4 billion at the end of the fourth quarter 2020, thanks to the free cash flow generation.

“Our integrated business model is ideally positioned to benefit from recovering demand,” chief executive Ben van Beurden said in a statement.

“We have reduced net debt by more than $4 billion this quarter, progressing towards the $65 billion milestone to increase shareholder distributions,” van Beurden added.

Once the $65-billion debt milestone is achieved, Shell aims to increase shareholder distributions to 20-30 percent of its cash flow from operations.

Earlier this week, BP—reporting a tripled net profit for Q1—said it was resuming share buybacks this quarter, having reached its goal to cut net debt to $35 billion ahead of schedule.

By Charles Kennedy for Oilprice.com

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