Shell’s profits fall short but divi keeps pumping

Royal Dutch Shell reassured investors over the future of its dividend today despite disappointing profits.

The oil major, which with rival BP accounts for almost a fifth of shareholder payouts by UK companies, made $1.8 billion (£1.4 billion) of underlying profits in the final quarter of 2016.

That was 14% up on a year earlier, but almost $1 billion short of City hopes.

Despite the weaker-than-expected earnings, shares in Shell, up 50% in the past year on a recovering oil price, added another 29p, or 1%, to 2166p today as analysts highlighted positive prospects for the dividend.

Shell racked up major debts in its $52 billion takeover of BG Group a year ago, prompting worries that the giant might have to cut the payout in the face of plunging oil prices.

But chief executive Ben van Beurden has cut the debt pile from $78 billion to $73 billion over the past year, slicing thousands of jobs and pruning capital investment, while crude prices have recovered.

The boss also highlighted that the cashflow of more than $9 billion covered the payout and its capital spending for the second quarter running.

RBC Capital analyst Biraj Borkhataria said: “It’s a step in the right direction.”

Shell is also on track with its $30 billion programme of asset sales, this week selling $3.8 billion of North Sea fields to private-equity firm Chrysaor to make further inroads on the debt.