Even though the energy company warned of “significant uncertainty” because of the novel coronavirus pandemic, its dividend was increased by Royal Dutch Shell on Thursday after the company easily beat third quarter profit forecasts.
After having cut its dividend in April – which was the first time that the Anglo-Dutch company had done so since the 1940s because of a steep drop in global oil prices and the hit to global demand for fuels because of the novel coronavirus pandemic, the company gave clear signals of renewed confidence in the market as it said that it would increase its dividend on an annual basis.
As a part of its plan to reduce greenhouse gas emissions to net zero by 2050, a major restructuring is being planned by Shell. It also wants to implement “a complete overhaul” over the next 30 years.
During the third quarter, there was a 80 per cent year on year drop in Shell’s adjusted earnings to $955 million but that was enough to easily beat forecasts of the same of company-provided average analysts at $146 million profit.
A record profit from Shell’s marketing division was the major driver of the third quarter results. The marketing division of the company includes the largest retail network of the world. With earnings at $1.6 billion for the quarter, the division clocked a 10 per cent year on year growth for the company.
During the quarter, the value of its LNG portfolio by just under $1 billion was written down by Shell, the biggest Liquefied Natural Gas trader of the world and focused more on its flagship Prelude project in Australia.
“As a result of COVID-19, there continues to be significant uncertainty in the macroeconomic conditions with an expected negative impact on demand for oil, gas and related products,” Shell said in a statement.
So far this year, the share prices of the company have dropped by more than 60 per cent which is greater than any other major oil company because its investors were worried about the impact that the pandemic would have on the demand of the global energy as well as the ability of the company to manage costs even after it had cut its dividend in April.
The global energy sector was also weighed down by concerns over the trend in the world of shifting to lo carbon emitting energy sources.
It would reduce the number of its oil refineries from 14 sites to six “energy and chemical parks”, Shell said on Thursday.
(Adapted from TheStar.com)