Shell shareholders feel the pinch with earnings per share diving 310%

Shell shareholders feel the pinch with earnings per share diving 310%

Following a torrid half-year that hit oil prices hardest, oil and gas extraction and production company Shell (LON:RDSA) saw its share price dip slightly on what was likely an already priced-in set of woeful half-year trading results.

The company reported that income attributable to shareholders had flipped from an $8.99 billion profit for H1 2019, to a loss of $18.16 billion loss for H1 2020. According to its results, this turnaround represents a negative 302% shift year-on-year.

Similarly, the company’s CCS (not taking into account the changes to oil prices) earnings attributable to shareholders dived 288% on-year, from an $8.32 billion profit to a $15.62 billion loss. It added that its adjusted earnings had fallen 60% from $8.76 billion to $3.49 billion year-on-year, while its cash flow from operating activities fell 11% and its ROACE on a net income basis flipped from 8.4% to negative 2.9%.

If you’re looking for anything to celebrate, the company’s expenses narrowed on-year, during the half-year period. Its cash capital expenditure fell slightly from $10.94 billion to $8.59 billion, while its underlying operating expenses fell 12%, from $18.34 billion, to $16.11 billion. Though, these drops in expenditure were likely a result of reduced production activity and staff costs due to the pandemic.

The situation was equally bleak for Shell shareholders, with basic EPS falling 310% and turning from a $1.11 income to a $2.33 loss per share. Similarly, dividends dropped 66%, from $0.94 to $0.32.

Between the half-year end 2019 and 2020, the company’s gearing widened from 27.6% to 32.7%.

Shell looks ahead

Speaking on macro conditions and its expectations looking forwards, the company’s statement read:

“As a result of COVID-19, there continues to be significant uncertainty in the macroeconomic conditions with an expected negative impact on demand for oil, gas and related products. Furthermore, recent global developments and uncertainty in oil supply have caused further volatility in commodity markets. The third quarter 2020 outlook provides ranges for operational and financial metrics based on current expectations, but these are subject to change in the light of current evolving market conditions. Due to demand or regulatory requirements and/or constraints in infrastructure, Shell may need to take measures to curtail or reduce oil and/or gas production, LNG liquefaction as well as utilisation of refining and chemicals plants and similarly sales volumes could be impacted. Such measures will likely have a variety of impacts on our operational and financial metrics.”

Investor insights

Following the news, Shell shares dipped 2.53% or 31.00p, to 1,195.80p per share 30/07/20 13:20 BST. This price is down over 52% year-on-year for the same day. The company’s p/e ratio stands at 8.08.