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Earnings Preview: Shell to post strong Q1

Associated Press: 04.27.10, 07:12 AM EDT

AMSTERDAM — Royal Dutch Shell PLC reports first quarter earnings before markets open Wednesday.

WHAT TO WATCH FOR: Shell’s earnings are likely to rebound strongly in line with a near doubling of oil prices since the first quarter of 2009.

However, as gas prices have lagged oil and around half of Shell’s production is gas rather than oil, it won’t benefit quite as much from oil’s rise from $41 a year ago to $79 in the first quarter of 2010 as other major intergrated oil companies.

Shell’s refining margins are expected to be weak, in line with others in the industry.

Shell has said it is reviewing 15 percent of refining activities and 35 percent of its retail outlets for a potential sale, notably operations in 21 African countries including Nigeria.

In addition to cutting personnel costs, Shell has been investing heavily in new capacity to reverse a decade-long slide in production. Most analysts are upbeat about future prospects, but it may underperform peers until production comes on line. Shell has frozen its quarterly dividend at the 2009 level of $0.42 per share for 2010 to protect its balance sheet.

“Although the first quarter results will show some of the benefits from streamlining the organization, improved production volumes” won’t happen until 2011 or 2012, said analyst Tony Shepard of Charles Stanley, who rates shares a Hold.

WHY IT MATTERS: Shell rivals BP ( BP news people ) as Europe’s largest oil company, and only ExxonMobil ( XOM news people ), which presents earnings Thursday, is larger.

WHAT’S EXPECTED: Analysts polled by Thomson Reuters expect Shell to report a net profit of $3.99 billion.

LAST YEAR’S QUARTER: Shell reported net profit of $3.49 billion.

Copyright 2010 The Associated Press. All rights reserved.


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