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| Shell’s annual results provide opportunity to assess the industry’s response to economic climate |
Sat, 24 January 2009
Since reporting third quarter profits of 10.9 billion US dollars (£6.6 billion) in October, the outlook for Royal Dutch Shell and the rest of the sector has undergone significant change due to the collapse in oil prices, falling demand for oil products and the onset of a global recession.
Shell’s annual results on Thursday will provide one of the first opportunities to assess the industry’s response to the changed economic climate, particularly in terms of future investment plans and dividend prospects.
Capital expenditure is expected to have been about 30 billion US dollars (£21.6 billion) in 2008, but Shell recently postponed some Canadian oil sand projects as they require high oil prices to justify their development.
With production levels under pressure, the company’s performance in finding new reserves will be closely watched.
Charles Stanley stockbrokers analyst Tony Shepard said Shell’s share price had performed remarkably well in the face of the economic downturn, buoyed by a flight to safety because of the company’s dividend yield.
He added: “Clearly the operating environment has deteriorated significantly since Shell made its third quarter announcement.
“In addition, there is uncertainty surrounding the impact of global recession on the demand for oil products and chemicals, and given the low oil price environment, risks to profit estimates are still on the downside.”
Charles Stanley is looking for net income of 4.8 billion US dollars (£3.46 billion) in the final quarter of 2008, down from 5.8 billion US dollars a year earlier.
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