Royal Dutch Shell, the oil giant, has just announced plans to invest approximately 25 billion dollars to develop oil and gas operations in Nigeria and other places across the world. The company actually made this announcement in its 2017 first quarter financial results, which they released on Thursday.
In this report, the company revealed it had a net income of 2.2 billion dollars and, more importantly, expects to generate upwards of 10 billion dollars, in cash flow, by delivering some of these new projects by next year. Also, the company recently announced it is resuming oil production to 225,000 barrels per day at the Bonga Floating Production Storage Offloading field, which lies in the deep waters off the coast of Nigeria.
Shell Chief Executive Ben van Beurden notes, “We saw notable improvements in upstream and chemicals, which benefited from improved operational performance and better market conditions.”
The company currently has operations in more than 70 countries is actually Nigeria’s oldest oil producing partner, sharing various joint venture and production share arrangements in conjunction with the Nigerian National Petroleum Corporation.
In addition, Royal Dutch Shell has also reported a sharp rise in net profits, this week, numbers which beat analyst forecasts and which puts the company’s earnings in line with its industry peers. This has helped the company to restore some of its refining margins to boost revenue for the first time in nearly three years.
Overall, oil and gas production increased by 2 percent in the quarter, up now to 3.752 million barrels of oil [equivalent], up from 3.905 million barrels of oil equivalent in the fourth quarter of 2016. Net income—attributable to shareholders—in this quarter, and based on current supply cost (and excluding exceptional items) increased 142 percent to $3.75 billion USD. This is notably better than the company provided analyst’s consensus of $3.05 billion USD. Last year, during the same quarter, the net income attributable to shareholders was only $1.55 billion USD.
At the end of the day, this snapshot should reassure those who have been worried about the oil industry’s dividends. Still, Shell cannot depend upon organic cash generation for debt payment. Of course, they can always pull from asset sales to stay afloat.