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Shell swings back to profit on oil price recovery

·2-min read
Royal Dutch Sheel said it posted net profit of $5.7 billion in the three months to March

Royal Dutch Shell swung back into profit in the first quarter as oil prices recovered strongly from a year earlier, the company said Thursday.

The Anglo-Dutch group posted net profit of $5.7 billion (4.7 billion euros) in the first three months of the year, Shell said in a statement.

That compared with a loss after tax of $24 million in the first quarter of 2020 when the coronavirus pandemic began to slam the price of crude.

The first-quarter performance this year benefitted also from a $1.4-billion gain following the sale of assets, the statement added.

"Shell has made a strong start to 2021, generating over $8 billion of cash in the quarter," said chief executive Ben van Beurden.

"Our... model is ideally positioned to benefit from recovering demand."

Shell had dived into net loss of $21.7 billion last year as factories shut and planes were grounded.

As a result, it decided to axe more than 10 percent of its global workforce, or up to 9,000 jobs.

Its losses and steep job cuts mirrored the situation elsewhere in the energy sector last year.

After lockdowns began to spread towards the end of the first quarter in 2020, oil prices dropped off a cliff, even briefly turning negative.

Prices then rebounded sharply, however, with benchmark Brent North Sea oil contract currently trading around $67 per barrel.

Shell rival BP also recovered in the first quarter, announcing this week net profit of $4.7 billion, which compared with a year-earlier loss of $4.4 billion.

France's Total, meanwhile, posted a net profit of $3.3 billion in the first quarter that was even higher than pre-pandemic levels.

On Thursday in the wake of its own results, shares in Shell climbed around 1.0 percent in early London deals.

"Fortunately for investors these latest results come without the drama seen this time last year when Shell cut its dividend for the first time since the Second World War," said Keith Bowman, equity analyst at Interactive Investor.

Shell this time around increased its dividend payout by about 4.0 percent compared with the final quarter of last year.

Bowman meanwhile noted that extreme winter weather hitting Shell's US Texas operations had dragged on adjusted earnings, "although, as with rivals, an upturn in energy prices has aided profit generation".

Shell said this year's deadly Texas winter storm cost the group $200 million in the first quarter on reduced oil output.

February's polar vortex storm killed dozens of people, left millions without electricity and water, caused billions of dollars of damage to the sector and forced several Texas electric firms to file for bankruptcy.

The freezing temperatures also caused outages at energy installations -- natural gas-fired power plants, wind turbines and nuclear plants -- which are not typically insulated as they are in other states with colder climates.