The price of oil has been falling back from $50 per barrel, with Brent Crude having now dipped below $45. Yet the share prices of our big oilies have been picking up — Royal Dutch Shell (LSE: RDSB) shares were up 26% from the end of May to 2,105p before today’s first-half results, while BP shares have put on 21% to 433p.

That’s partly due to the Brexit effect and the resulting fall in the pound — oil is sold in dollars, and that’s going to make a pound-denominated share price look cheaper. And the post-referendum flight to safety has sent a fair bit of investors’ cash in the direction of these shares too.

Disappointing results

But if falling oil isn’t enough bad news, today Royal Dutch Shell revealed a worse-than-expected Q2 with a 72% fall in adjusted earnings on a current cost of supplies (CCS) basis, to $1.045bn. Analysts were predicting around twice that figure. For the half, CCS earnings are down 65%.

Some of the fall was blamed on depreciation charges stemming from Shell’s £35bn takeover of BG Group in February, but falling oil prices and weakening downstream conditions played big parts — although BG’s production did add to earnings too.

Oil and gas production in Q2, following the BG acquisition, reached 3.5m barrels of oil equivalent per day for an increase of 28% on the same period last year. BG contributed 768,000 barrels per day.

Cash flow came in disappointingly low, at just $2.29bn (down from $6.05bn in 2015’s Q2) . That’s not even enough to cover the $3.7bn paid out in dividends, although $1.2bn of that was in scrip. First-half cash flow dropped from $13.16bn to $2.95bn.

Dividends maintained

Shell announced a Q2 dividend of 47 cents per share, at the same level as the first quarter, which supports hopes that the full-year dividend will be maintained — though at a predicted yield of 6.5%, it will be worth less in sterling now that the pound has taken a Brexit hit.

With BP having reported an unexpectedly weak second quarter earlier in the week, what does all this say for investors?

Chief executive Ben van Beurden said that Shell is managing the down-cycle “by reducing costs, by delivering on lower and more predictable investment levels, executing our asset sales plans and starting up profitable new projects.” And the company reiterated its cost-cutting targets, reducing planned capital investment to $29bn for the full year.

The long-term future is entirely tied to the price of oil, and though the price of a barrel has now slipped significantly from that magic $50 level, that has to be a short-to-medium term problem only. The question is surely when, not if, oil will recover to those long-awaited $60-$75 levels. Longer than expected, perhaps?

Share price falling

Shell shares fell 86p (4%) in the first hour of trading, to 2,020p, reducing the gain since the end of May to 18%, but that’s still nothing to be sniffed at. And a 6.5% dividend yield should keep investors ticking over nicely as they wait for oil prices to creep up again — providing the payout is maintained.

Meanwhile, Mr van Beurden told us: “Our investment plans and portfolio actions are focused firmly on reshaping Shell into a world-class investment case through stronger, sustained and growing free cash flow per share.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended BP and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.