Royal Dutch Shell Plc  .com Rotating Header Image

Shell Doomed Project Scalebacks

Screen Shot 2015-01-12 at 08.45.23From an article by Royston Wild published 15 Jan 2015 by The Motley Fool under the headline:

“Why Royal Dutch Shell Plc And BP plc’s Project Scalebacks Are Doomed To Fail”

With the oil price collapse showing no signs of bottoming any time soon, the world’s fossil fuel giants are in a desperate struggle to ratchet up their cost-saving initiatives and cut their exposure to what is becoming an increasingly perilous market.

Just yesterday, Royal Dutch Shell (LSE: RDSB) announced that it was stopping work on a £4.3bn petrochemicals plant with Qatar Petroleum. Construction of the huge Al-Karaana complex started in 2012, but Shell has been forced to bin the operation due to “high capital costs rendering it commercially unfeasible, particularly in the current economic climate prevailing in the energy industry.”

The Brent benchmark has shed a staggering 60% of its value since the summer, and touched its cheapest since March 2009 at around $45.20 per barrel just this week.

The effect of this ongoing weakness is prompting the City’s brokers to hurriedly take the red pen to their market forecasts, and Bank of America-Merrill Lynch projected just today that Brent could dip as low as $31 by the end of the first quarter. It forecasts an average of just $52 per barrel for 2015.

Undoubtedly, BP and Shell are caught in a delicate balancing act between exercising fiscal responsibility in the face of current market challenges, and maintaining a sturdy earnings outlook by creating a healthy asset base. As a result I believe that earnings forecasts could be subject to severe downgrades in both the near – and long term.

FULL ARTICLE

1 Comment on “Shell Doomed Project Scalebacks”

  1. #1 Edward Stevens
    on Jan 16th, 2015 at 10:05

    The Brent benchmark has shed a staggering 60% of its value since the summer, and touched its cheapest since March 2009 at around $45.20 per barrel just this week.

%d bloggers like this: