RDS: Q410 Results Preview

LUCAS HERRMANN, Deutsche Bank (02/02/2011)
"Momentum continues but downstream remains difficult: Results due Feb 3. Although we expect results to show continued momentum in production, we believe net profits will have been impacted by difficult downstream markets. We see 2011 as a year in which the start-up of several large projects should see a reduction in execution risk, albeit with the full benefits unlikely to be in evidence until 2012/13. Our confidence in ongoing signs of operational improvement at Shell means it remains our preferred major at this time. Buy.

Profit momentum strong but starting to moderate: We expect Q410 results at Shell to show a 70% improvement in net income YOY. . .Relative to Q310, however, profit momentum is set to slow modestly despite the ongoing benefit of improved oil & gas prices. . .In the downstream, we expect Shell to have seen a marked improvement on the loss-making result of Q409. However, with crude prices rallying sharply through the quarter, marketing margins are almost certain to have come under pressure.

Dividends: We expect the company to guide toward an unchanged $1.68/share dividend through the 2011 year, though we remain optimistic that there may be some scope for an increase in H211 should Pearl GTL's commissioning run smoothly."

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