Jan 29 2007
Oil giant Royal Dutch Shell will set another profits record when it posts full-year results on Thursday.
Soaring oil prices mean broker UBS expects a net income figure in the region of £12.22bn, which far exceeds Shell’s previous best of £11.67bn set last year.
But the performance in the fourth quarter, when profits are likely to be marginally lower, will carry the most interest for investors.
Oil prices have eased by 30% since hitting $77 in August, meaning Shell’s production record will be brought into focus. It is likely that output fell marginally in the year, following attacks on its production facilities in Nigeria.
Like other companies, Shell is finding it tougher to replace reserves – a challenge made more difficult over the long term by the loss of some of its interests in the Sakhalin-2 gas project to Russian monopoly Gazprom.
In light of that move, it is expected that Shell will offer further guidance on its medium to long term output prospects. Analysts believe that deal-making will play a key part in plans to bolster production performance.
Jon Rigby, an analyst at UBS, pointed out Shell surprised on the upside at its last earnings announcement.
He added, “It is not clear that conditions exist in the near term to support further earnings outperformance, however, and the near-term newsflow looks challenging.”
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