Seeking Alpha

Shell warns of plunge in profits

  • Shell (RDS.A, RDS.B) has warned that it expects its Q4 profit to be "significantly lower than recent levels of profitability," with the company estimating that adjusted earnings on a current cost of supplies basis will plummet to $2.9B from $7.3B a year earlier. Consensus is for $4B.
  • Shell cited oil and gas prices, "weak industry conditions in downstream oil products, higher exploration expenses, and lower upstream volumes" as reasons for the drop in earnings.
  • Shell is due to publish its full results on January 30. (PR)
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Comments (13)
  • al roman
    , contributor
    Comments (11221) | Send Message
     
    Everybody and his Brother produces oil now.
    17 Jan 2014, 06:31 AM Reply Like
  • Lallemand
    , contributor
    Comments (38) | Send Message
     
    Another difficult quarter with Shell, which disappoints again and again, probably due to its large exposure to gas, difficulties in Nigeria, several huge investments which do not pay off, and low refining margins. There is no sweet spot, and money is probably better put elsewhere. So I sold my 7700 shares 5 minutes ago. I may buy back at a lower price, or invest in more promising companies.
    17 Jan 2014, 07:48 AM Reply Like
  • RWMostow
    , contributor
    Comments (1555) | Send Message
     
    Lalle-

     

    What's on your watch list that is more promising? Thanks.

     

    -rwm
    17 Jan 2014, 09:33 AM Reply Like
  • Lallemand
    , contributor
    Comments (38) | Send Message
     
    I am a contrarian/value/yield investor (that is why I bought some Shell in the past), internationally minded. I bought recently some Standard Chartered (well managed UK bank active mainly in Emerging markets, decent yield, low valuation, major underperformance due to Emerging Markets uncertainties, and a problem in Korea like most banks active in Korea), some Anglo-American (new management, huge past underperformance but interesting assets), SSE (a UK utility, high yield but potential political risk on retail electricity price lowered the stock), Burberry (Luxury at a decent price, but chinese litigation), E.on (German utility at rock bottom price compared to asset replacement value, but huge uncertainties on German energy plans), and a few French small caps stock (large inflow of cash in small caps French stocks). I bought them on their home markets stock exchange, so I do not know if you can buy from the US, and in addition you have the exchange risk. Make your own due diligence since all these stocks run a few risks, which explain their price. I just think (and may be wrong) that the rewards outstrip the risks.
    17 Jan 2014, 01:38 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    I have posted for a while that RDS is a turkey that lost it's way.
    17 Jan 2014, 07:48 AM Reply Like
  • Retracement
    , contributor
    Comments (471) | Send Message
     
    Watershed quarter for Royal Dutch Shell. Ben van Beurden finally replaced Peter Voser on January 1st, a Dutch CEO again four (long) years after Voser succeeded Jeroen van der Veer in 2009.

     

    Shell will step up divestments this year and next year after 2013 CapEx peaked at $45 billion. Some Nigerian oil blocks, Shell's stake in Woodside (OTCPK:WOPEY), some North Sea assets, about $15 billion worth of assets total.
    17 Jan 2014, 08:37 AM Reply Like
  • retired358
    , contributor
    Comments (218) | Send Message
     
    Unbelievable. Management just cannot get it right...poor decisions for the past 16 years are the reason that share price is about where it was in 1997.

     

    They use prices and margins as the reason. We shall see but I would be willing to bet that other companies will not post earnings down this much...which would mean that management decisions are the real reason....
    17 Jan 2014, 08:38 AM Reply Like
  • john001
    , contributor
    Comments (871) | Send Message
     
    The question is...."will they borrow again to pay the dividends". I say yes.
    17 Jan 2014, 08:58 AM Reply Like
  • Xfinity
    , contributor
    Comments (34) | Send Message
     
    I don't know where you get your numbers John001. These are full-year pay-out ratio's for the last several years, dividend compared to net profit:
    2008 37.22%
    2009 80.91%
    2010 50.32%
    2011 33.47%
    2012 40.12%
    2013 TBA
    17 Jan 2014, 10:05 AM Reply Like
  • john001
    , contributor
    Comments (871) | Send Message
     
    X..just saying that shell has borrowed before to protect the divs and, with low interest rates, they could well do it again.
    17 Jan 2014, 12:17 PM Reply Like
  • DougRk
    , contributor
    Comments (1622) | Send Message
     
    @Xfi, if my quick calculations are right, divis currently are 11.3B. The last 3 quarters earnings annualized is 11.8. Cutting it awfully close.
    17 Jan 2014, 02:54 PM Reply Like
  • retired358
    , contributor
    Comments (218) | Send Message
     
    dsr70/xfinity: Rather than earnings, one needs to look at cash flow...cash flow covers both dividends and Capex...if it does not do so, then will need to borrow or cut dividends...

     

    Yes, they have a history of piling all the bad news/write-offs into a single quarter or year...that not only makes the new guy look better but also allows earnings gains in the next quarter/year...

     

    The real concern is that share price has not risen in the past 16+ years...which means that total return to shareholders is only about equal to the dividend...which, while good in its own right, doesn't come close to the total return of most other large energy companies. This failure can only be attributed to poor management/poor management decisions...
    17 Jan 2014, 05:38 PM Reply Like
  • Debutant
    , contributor
    Comments (2546) | Send Message
     
    Timing of this warning looks interesting to me; a well-known corporate game: Communicate all the bad news, actual, potential and probable, at the beginning of the new CEO's tenure (or, at the end of an already lousy year) to reduce the community's pressure on the new guy (or for the coming year).

     

    Now the big question I'm asking myself is whether to "hold" my RDS shares, or "add a few more" until the smoke will clear.
    17 Jan 2014, 10:13 AM Reply Like
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