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Royal Dutch Shell takes cashflow crown off Exxon Mobil

Royal Dutch Shell has taken Exxon Mobil’s cashflow crown, a year after completing the biggest deal in its history.

Europe’s largest energy company vaulted ahead on this closely watched indicator of financial health in the first nine months of 2017 as assets acquired from BG Group from Brazil to Australia churned out cash. For the year as a whole, Shell is on course to surpass its larger US rival on the measure for the first time in about two decades.

Shell generated $28.38 billion (€24.34bn) of cashflow from operations in the first nine months of the year, compared with $23.52 billion (€20.18bn) from Exxon. Chief executive Ben Van Beurden has already spelled out that his main long-term goal was overtaking Exxon to become the best-performing oil major.

“We’re doing a very good job in terms of positioning ourselves as the No 1 company in the sector,” chief financial officer Jessica Uhl said Thursday on a conference call. “We’re consistently delivering the highest cash flow in the sector. Frankly, we’re reshaping the company in terms of our cost structure and our capital efficiency.”

Still, Shell’s market value and total output remain below that of Exxon. The Anglo-Dutch company piled on borrowings to buy BG, and though Mr Van Beurden has made reducing that burden his top financial priority, third-quarter net debt of $67.7 billion (€58bn) was higher than the preceding period.

Dividend

Shell also failed to cover its dividend with free cashflow, although it has done so in aggregate over the past 12 months.

“It will take time for Shell to surpass Exxon, but it is on the right track,” said Ahmed Ben Salem, an analyst at Oddo Securities in Paris, who has a buy rating on the shares. “The company needs to keep generating $10 billion of cash every quarter to cover spending and the full dividend, and it has the assets to achieve that.”

Third-quarter profit adjusted for one-time items was $4.1 billion, an increase of 47 per cent from a year earlier and higher than the average analyst estimate of $3.62 billion. Oil and gas output was 3.657 million barrels of oil equivalent a day, up from 3.595 million a year earlier. Exxon produced 3.88 million barrels a day. – Bloomberg

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