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Shell Doubles Profits But Share Price Tumbles

Publication Date: 02 Feb 2018 - By Market Mogul By Market Mogul
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Equity Fundamental Equity UK Energy

Europe’s biggest oil company, Royal Dutch Shell, has doubled its earnings in its finals released on Thursday.

The company enjoyed improved exploration and production which lifted profit to a three year high but refining and trading fell short of the market’s expectations.

A surge in crude raised Shell’s adjusted profits, excluding the US tax charge and other one-off payments, stood at $4.3bn in the fourth quarter, the highest since 2014. In the same quarter the year before, the company reported earnings of $1.8bn. The reported profits were ahead of the consensus forecasts for $4.24bn.

This means Shell is making as much money when crude was trading at $60 a barrel as when it was trading at $100.

The group estimates that it took a $2-2.5bn charge following recent US tax reform. This stems from changes to rules governing the use of past losses to offset future profits.

Shells exploration and production earnings stood at $1.65bn, with its refining and marketing were $1.4bn a fall both quarter-to-quarter and year-on-year.

Shell shares fell by nearly 4%, the largest fall since May. The share price in London fell to lows of £24.60 at market open, down from the market close on Wednesday which finished at £24.965. At 11:30, shares were trading at £24.61.

(Source: Google Finance)

 

Following one of the worst oil gluts in generations, Shell has had to rapidly adjust.  The company has had to reduce capital expenditure by eliminating expensive projects and laying off staff. The company has also invested more into clean energy in an attempt to diversify away from oil.

CEO Ben Van Beurden who was appointed in 2014 has made it his mission to cut company debt, which ballooned to almost $78bn following the purchase of British oil and gas company, BG Group, in April 2015 for $70bn. Although improving, Shell still has $65bn worth of debt, when in 2014 this had been $24bn.

The Anglo-Dutch company is close to overtaking its American rival, Exxon Mobil in market value. Shell’s total profits stood at $16.18bn with Exxon expected to report earnings of $15.7bn on Friday.

Photo Credit:  Lee Jordan

The post Shell Doubles Profits But Share Price Tumbles appeared first on The Market Mogul.

 

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