Royal Dutch Shell finals

Royal Dutch Shell a global group of energy and petrochemical companies. I have a holding in my income portfolio (epic code: RDSB)

Shell announced their full year results today and their earnings were as reported in their trading statement commented on here, so I will not repeat them again.


EPS was $2.66 down 38.7%, excluding identified items it was $3.10 down 23.3%. A fourth quarter dividend has been announced of $0.45, making $1.80 for the full year both showing a 4.7% increase over last year. The first quarter 2014 dividend is expected to be declared at $0.47 an increase of 4.4%.


Free cash flow (FCF) was extremely disappointing and fell to a negative $0.8bn from $13.6bn last year and net debt has increased from $19.2bn to $34.9bn with gearing at 19.4% compared to 10.9% last year.


In a separate statement Van Beurden set out some changes in in strategic emphasis, which can best be described as improving financial performance, that can be achieved by restructuring and focusing on investments that deliver high quality returns.


They have decided to stop its exploration programme for Alaska due to the regulatory uncertainty, they will increase the pace of asset sales, which are expected to be $15bn for 2014-15 and reduce capital expenditure for this year to $37bn compared to $46bn last year.


The reduction in capital expenditure does not go far enough.  With a dividend bill of close to $13bn, they will need net operating cash flow of $50bn, for the FCF to cover the dividends.  Hence the need for $15bn of disposals.




Although the increase in dividends is welcome, Shell has much to do in improving the financial performance to ensure the continuation of this dividend growth.


Exxon results also came out today and their earnings were down 27% and EPS down 24% for the year, although excluding the effect of lower asset sales down by 8.2% and 6% respectively.