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Shell earnings slide and shareholders miss out following £3.4bn pay day

City AM logo City AM 28/10/2021 Millie Turner
© Provided by City AM

Shell adjusted earnings slipped 25 per cent to $4.1bn in its third quarter unaudited results, while its shareholders missed out following their hefty pay day.

Shareholders lost $477m in the period, after raking in $3.4bn in the previous quarter.

Shares dipped 2.89 per cent to 1,714.6p per share by mid-afternoon.

Shell put the quarter’s earnings dive down to “adverse one-off tax impacts”, as well as the impacts of Hurrican Ida which struck the US over the summer and pushed lower production volumes.

However, the London-listed company noted that this was partly offset by the energy crisis which sent prices flying, and which Shell reaped the financial benefits of.

Shell has also reinstated an interim dividend of of $0.24 per ordinary share today, following stakeholders’ losses. The energy giant’s net debt also shrank to $57.4bn in the quarter, while free cash flow increased to $12.2bn.

The third quarter results come on the back of its selling of the Permian business in the US in September, after which Shell received $9.5bn in cash.

The cash proceeds from the deal will be used to fund $7bn in additional shareholder distributions beginning next year, once the deal has been completed. What’s left over will be used to maintain its balance sheet.

Hargreaves Lansdown equity analyst Nicholas Hyett said: “These are a muddy set of results from Shell. The rapid swings we’ve seen in oil & gas prices over the last 18 months mean the group has had to take a large writedown in the value of the derivatives it took to out hedge itself against a further price fall. These have officially pushed the group into a loss for the quarter.

“However, the underlying numbers, and particularly the all-important cash flow numbers, are looking far more upbeat.”

The company has also been batting off calls for a break up from Wall Street hedge fund Third Point, after acquiring a $750m majority stake in it.

Third Point is urging the oil giant to split up into multiple companies to increase its performance and market value, accusing Shell of having an “incoherent” set of strategies for its businesses, a source told Reuters.

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