Shell takes top earnings spot from Exxon as oil majors adapt to low prices

Tue Nov 1, 2016 12:21pm EDT
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By Ron Bousso and Karolin Schaps

LONDON (Reuters) - Royal Dutch Shell and BP on Tuesday joined peers in reporting higher than expected earnings by making further deep cuts in spending to cope with an oil price downturn now in its third year.

The companies said they were well on the way to adapting to the more than halving in prices. But any new sharper downturn would test their ability to invest for growth and retain the relatively large dividends their shareholders expect.

Shell's stock rose by over 4 percent as it announced higher quarterly earnings than arch-rival U.S. Exxon Mobil, the world's largest listed oil company by output and market capitalization.

The Anglo-Dutch major, which acquired rival BG for $54 billion earlier this year, had been under pressure to cut costs after second quarter earnings came in around 50 percent below forecasts.

By contrast, BP's stock fell by more than 4 percent by 1210 ET as some analysts said its results were boosted by a one-off tax gain, meaning its longer-term profits and ability to pay dividends could still be at risk. The oil price was trading flat on the day at around $49 a barrel.

Shell's Chief Executive Officer Ben van Beurden said the oil sector had yet to emerge from troubled waters, but huge cost savings meant oil majors were getting closer to balancing their operations at today's oil prices of around $50 a barrel.

The prospects for an oil price recovery are still unclear, van Beurden said, despite attempts by OPEC and other producers to agree a deal to limit output and reduce the global glut which has pushed oil prices down by 50 percent since June 2014.

"Lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain," van Beurden said.   Continued...

A woman holds the handle of an old pram in front of vintage Shell petrol pumps at the annual Goodwood Revival historic motor racing festival, near Chichester, Britain September 9, 2016. REUTERS/Toby Melville/File Photo