Shell, Total swing back to profit on oil price recovery

London, United Kingdom: Royal Dutch Shell returned to profit in the first quarter as oil prices rebounded sharply from a year ago, the company announced Thursday, while French energy giant Total posted a sharp increase in quarterly profits, outstripping pre-pandemic levels as oil prices rebounded from the doldrums of the coronavirus crisis.

Shell said in a statement that the Anglo-Dutch company made a net profit of $5.7 billion (4.7 billion euros) in the first three months of the year, while Total reported a net profit of $3.3 billion (2.7 billion euros) in the first three months of the year compared to just $34 million a year earlier.

Shell's announcement compares to a loss after tax of $24 million in the first quarter of 2020, when the coronavirus pandemic started to depress oil prices.

According to the release, the first-quarter results this year benefited from a $1.4-billion gain from the selling of properties.

"Shell has made a good start to 2021, raising more than $8 billion in cash in the quarter," said CEO Ben van Beurden.

"Our... model is perfectly placed to benefit from resurgent demand."

Last year, Shell suffered a net loss of $21.7 billion as factories closed and planes were grounded. As a result, it agreed to lay off more than 10% of its global staff, or up to 9,000 employees.

Its losses and job cuts mirrored the situation in the energy industry as a whole last year.

Total's recovery is similar to that of other oil majors, with Royal Dutch Shell and BP showing good results this week after a disastrous 2020.

"Total has already returned to the pre-crisis pace of high results," chief executive Patrick Pouyanne told the daily Sud Ouest newspaper. "All is well."

With investments in renewables, including a 20% stake in Adani Green Energy in India, "the group is accelerating its transformation into a large energy business," Pouyanne said in the company's earnings report.

Total plans investments of up to $13 billion this year, part of which will go to renewables and electricity.

But the company is remaining cautious as it maintained an operating cost savings target of $500 million this year.

"The oil environment remains volatile and dependent on the global demand recovery, still affected by the Covid-19 pandemic," Total said.

Rebound

Oil prices fell off a cliff after lockdowns started to spread towards the end of the first quarter of 2020, briefly turning negative.

However, prices quickly recovered, with the benchmark Brent North Sea oil contract currently trading around $67 per barrel.

Shell competitor BP has recovered in the first quarter, reporting a net profit of $4.7 billion this week, compared to a $4.4 billion loss the previous year.

Total, meanwhile, recorded a $3.3 billion net profit in the first quarter, which was higher than pre-pandemic levels.

Shell shares rose about 1.0 percent in early London trade on Thursday, following its own results.

"Fortunately for investors, this year's results lack the drama seen this time last year, when Shell cut its dividend for the first time since World War II," said Keith Bowman, equity analyst at Interactive Investor.

Shell raised its dividend payout by around 4.0 percent this time around compared to the fourth quarter of last year.

Meanwhile, Bowman acknowledged that severe winter weather affecting Shell's US Texas operations had weighed on adjusted profits, "but, as with competitors, an increase in energy prices has helped profit generation."

Shell said this year's deadly Texas winter storm cost the company $200 million in lost oil production in the first quarter.

The polar vortex storm in February killed hundreds of people, left millions without power and water, caused billions of dollars in damage to the industry, and forced many Texas electric companies to declare bankruptcy.

The freezing temperatures have triggered power outages at energy facilities such as natural gas-fired power plants, wind turbines, and nuclear power plants, which are not normally insulated as they are in other states with colder climates.

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