The company’s net income excluding exceptional items of $4.2bn was about a
third higher than the equivalent in 2009.
Granted, ExxonMobil went one better: its second-quarter net income excluding
exceptionals jumped 85 per cent to $7.6bn.
If you can’t beat ’em, you should try to join ’em, which is what Shell under
chief executive Peter Voser has been trying to do for the past 18 months.
His perseverance is starting to pay off. Shell is back to generating enough
cash to cover its capital expenditure and dividend payments – it had cash
flow of $8.1bn in the three months to June and a combined $8bn in capex and
dividends.
More important, after its purchase in the quarter of East Resources and its
shale gas field in the US for $4.7bn, Shell announced yesterday that it was
accelerating a divestment programme, doubling the disposals target to $8bn,
in non-core and low-margin areas.
The more ambitious programme is welcome. The market for oil and gas assets is
buoyant, as Apache’s generously priced $7bn purchase from BP (in effect a
distressed seller) shows.
Mr Voser is also continuing to focus on costs, squeezing out $3.5bn so far on
an annualised basis after completing its internal restructuring, which has
seen 7,000 jobs shed mostly in the downstream and corporate divisions.
So Shell is becoming the more streamlined and fundamentally profitable company
investors are seeking, though the earnings momentum from cost-cutting has
probably peaked. It is also poised for more production, with $30bn of new
projects coming on stream in the next 12 months that should boost cash flow
and returns. That should be reflected in the bottom line from 2011 and 2012.
In the meantime, Shell remains something of a work in progress.
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