Oil giant Shell swings to quarterly profit but warns that 'outlook remains uncertain'
Royal Dutch Shell, the Anglo-Dutch multinational oil firm, reported better-than-expected earnings for its third quarter on Tuesday, but gave a cautious outlook as it continues to struggle in an environment of low oil prices.
Shell's earnings on a current cost of supplies (CCS) basis attributable to shareholders (excluding identified items) reached $1.4 billion in the third quarter, after contracting $6.1 billion in the same period a year ago. CCS is a common accounting measure for commodity-reliant businesses and Shell noted that the increase was due to lower operating costs and increased production.
Its earnings (excluding identified items) came in at $2.8 billion, compared with $2.4 billion for the third quarter 2015. This was an increase of 18 percent and better than a consensus estimate of $1.7 billion from the company.
"Shell delivered better results this quarter, reflecting strong operational and cost performance. But lower oil prices continue to be a significant challenge across the business, and the outlook remains uncertain," Ben van Beurden, chief executive officer at Royal Dutch Shell, said in a statement.
During early trading Tuesday, Shell's shares rose as much as 3 percent. But, Charles Newsome, divisional director at Investec, told CNBC he has its doubts when it comes to firms with very high levels of dividends pay-outs.
"In Shell's case there's been a lot of concern about the very high level dividend pay-out and the fact that those dividend pay-outs were not covered," Newsome said.
"I'm always deeply suspicious about companies that are paying uncovered dividends and effectively paying today and not investing for tomorrow, which is what appears to be going on here," he added.
The company announced a third-quarter 2016 dividend of $0.47 per ordinary share on Tuesday.