Black holes

2 November 2017 By John Foley Follow @johnsfoley

After years adjusting to cheap oil, Shell and BP are beating earnings estimates and throwing off enough cash to cover dividends. BP will soon be buying back shares, too. It’s a start. But even if prices hold up, it will be years before their returns top their cost of capital.

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Royal Dutch Shell on Nov. 2 reported revenue of $75.8 billion for the three months ending Sept. 30, a 23 percent increase year-on-year. Analysts had expected revenue of $68.4 billion, according to Eikon.

The Anglo-Dutch oil and gas producer’s earnings of $4.1 billion, excluding one-off items, compared with a company-provided consensus forecast of $3.6 billion. Shell, like many oil companies, reports a measure of earnings that reflects the current cost of extracting oil, rather than the actual cost of crude.

Shell’s average realised price per barrel of liquid fuels was around $47 during the quarter, compared with the latest Brent crude price of just over $60 a barrel.

Rival BP on Oct. 31 reported $1.9 billion of earnings, beating consensus analyst forecasts of $1.6 billion.

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