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Europe’s largest oil company Royal Dutch Shell plc (RDS.A Quick Quote RDS-A - Free Report) reported third-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.06. The bottom line came in below the Zacks Consensus Estimate of $1.41 due to lower production.

However, the energy major’s bottom line compared favorably with the year-earlier quarter's earnings of 24 cents per ADS, backed by stronger commodity prices.

The Hague-based Shell reported revenues of $$61.6 billion, which improved 37.7% from the third-quarter 2020 sales of $44.7 billion.

Meanwhile, Third Point, Daniel Loeb’s activist hedge fund, which has a $500 million stake in the company, is pursuing a breakup of Shell into multiple businesses, arguing this could unlock significant value.

Royal Dutch Shell PLC Price, Consensus and EPS Surprise

Royal Dutch Shell PLC price-consensus-eps-surprise-chart | Royal Dutch Shell PLC Quote

Operational Performance

Upstream: The segment recorded a profit of $1.7 billion (excluding items) during the quarter, turning around from a loss of $884 million (adjusted) reported in the year-ago period. This primarily reflects the impact of higher oil and gas prices, partly offset by lower volumes.

At $67.10 per barrel, the group’s worldwide realized liquids prices were 73.5% above the year-earlier levels while natural gas prices soared 204.5%

Shell’s upstream volumes averaged 2,081 thousand oil-equivalent barrels per day (MBOE/d), down 5.5% from the year-ago period mainly due to disruptions in U.S. Gulf of Mexico production after Hurricane Ida swept through the region. Liquids production totaled 1,497 thousand barrels per day (down 1.5% year over year) and natural gas output came in at 3,387 million standard cubic feet per day (down 14.5%).

Oil Products: In this segment, the Anglo-Dutch super-major reported adjusted income of $1.2 billion, 27.9% lower than the year-ago period. The unfavorable comparison was due to lower sales volumes and refinery processing. Meanwhile, refinery utilization came in at 71%, up 6% from the September-end quarter of 2020.

Integrated Gas: The unit reported adjusted income of $1.7 billion, jumping from $768 million in the July-September quarter of 2020. Results were primarily impacted by higher realized commodity prices. On a somewhat bearish note, LNG liquefaction volumes decreased 5.3% from the third quarter of 2020 to 7.39 million tons. Meanwhile, the total Integrated Gas production increased 11.1% year over year to 938 MBOE/d.

Chemicals: The segment recorded a profit of $395 million (excluding items) during the quarter compared to the year-ago earnings of $227 million on the back of higher realized margins in base chemicals.

Financial Performance

As of Sep 30, 2021, the Zacks Rank #1 (Strong Buy) company, which upped its carbon reduction target, had $38.1 billion in cash and $95.4 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 25.6%, down from 31.4% a year ago.

During the quarter under review, Shell generated cash flow from operations of $16 billion, returned $1.8 billion to its shareholders through dividends and spent $4.6 billion cash on capital projects.

The company’s cash flow from operations increased 54% from the year-earlier level. Meanwhile, the group raked in $12.2 billion in free cash flow during the third quarter, up from $7.6 billion a year ago.

Guidance

Shell expects fourth-quarter 2021 upstream volumes of 2,100-2,350 MBOE/d, while Integrated Gas production is expected between 940 MBOE/d and 980 MBOE/d. The company also foresees Oil Products sales volumes of 4,200-5,200 thousand barrels per day, Chemicals sales volumes of 3,500-3,900 thousand tons and refinery utilization in the range of 68-76%.

Earnings Schedules of Other Oil Supermajors

Among the big integrated players, ExxonMobil (XOM Quick Quote XOM - Free Report) and Chevron (CVX Quick Quote CVX - Free Report) are scheduled to release their results tomorrow, while continental rival BP plc (BP Quick Quote BP - Free Report) will come up with third-quarter numbers early next week.