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Shell Shares Fall on Talk Of Weak Q4

THE NEW YORK TIMES

By REUTERS
Published: January 13, 2010

Filed at 6:25 a.m. ET

LONDON (Reuters) – Shares in Royal Dutch Shell Plc <RDSa.L> fell over 2 percent on Wednesday on market talk that the company was guiding analysts to reduce their forecasts for the oil major’s fourth-quarter earnings.

“Consensus for Shell’s Q4 appears to be falling sharply. Lower gas realisations and losses downstream suggest earnings of around $2.6 billion (1.6 billion pounds) in the fourth quarter versus expectations previously closer to $3.3 billion,” one dealer said.

At the end of each quarter analysts talk to companies’ investor relations departments before fine-tuning their quarterly earnings forecasts.

While companies are not allowed to divulge market sensitive information, analysts say that the tone of the conversation often gives them an indication as to whether consensus forecasts are too high or too low.

“They (Shell) did suggest that refining margins have been very weak and also that the seasonal uplift of gas consumption we usually expect in the fourth quarter may not be so big this time,” one analysts who spoke to Shell said.

Shell declined immediate comment.

On Monday, U.S. oil major Chevron Corp <CVX.N> warned that its fourth-quarter results would be “sharply lower” than the previous quarter due to a further deterioration in refining margins, despite oil prices firming.

Average global refining margins in the fourth quarter fell to their lowest level since the first quarter of 1995, according to data from BP.

Analysts at Merrill Lynch forecast current cost of supply net income, excluding one-offs, of $2.89 billion, according to a research note forwarded to Reuters by a market source.

Morgan Stanley downgraded the Anglo-Dutch oil giant to “underweight” from “equalweight” on Tuesday, citing better opportunities elsewhere in the sector.

The investment bank said Shell would be the only one in its European peer group which would not grow oil and gas production in 2010, with output seen down 0.8 percent against an average group rise of 1.5 percent.

The perceived stronger growth prospects of rival BP Plc <BP.L>, allowed the London-based company to overtake Shell to become Europe’s largest oil and gas company by market capitalisation this week.

Shell’s London-listed “A” shares traded down 1.3 percent at 11:00 a.m. British time, compared with a 0.4 percent drop in the DJ Stoxx European oil and gas sector index <.SXEP>.

BP data on refining margins is available at: http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9016864&contentId=7030494

(Additional reporting by Simon Falush, Jon Hopkins, Dominic Lau and Blaise Robinson)

(Editing by Erica Billingham and Hans Peters)

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