Eyes Down For Royal Dutch Shell Plc’s Results

Oil super-major Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) is due to announce its annual results on Thursday (30 January).

At the time of writing, the shares of this FTSE 100 behemoth are trading at 2,300p — almost unchanged from a year ago compared with a 10% rise for the Footsie.

Profit warning

Shell has a new boss, Ben van Beurden, who got his feet under the chief executive’s desk as recently as 1 January. Less than three weeks later, the company released an unscheduled trading update, warning that fourth-quarter earnings “are expected to be significantly lower than recent levels of profitability”.

The market barely flinched. For one thing, oil companies’ quarterly earnings are notoriously volatile (Shell has missed expectations on occasions in the past by a big margin without issuing a profit warning); and, for another, markets are well used to hearing of sub-par earnings and impairment charges when a new chief executive takes the reins — what might be called the ‘new-boss-clean-slate’ phenomenon.

New expectations

What Shell’s unscheduled update does give us is a very good idea of some of the key numbers to expect in the upcoming results, shown in the table below.

  Q4 Full year
Earnings before identified items ($bn) 2.9 19.5
Identified items (mainly impairments) ($bn) 0.7 2.7
Earnings after identified items ($bn) 2.2 16.8
Cash flow from operating activities ($bn) 6.0 40.4
Cash flow from operating activities (excluding working capital movements) ($bn) 7.7 37.5
Net capital investment ($bn) 15.8 44.3

Shell describes these as approximate numbers, but it would be a surprise to see any big deviation. More than the numbers, investors will be keen to hear greater detail on strategy from the new chief executive, who said in the unscheduled update:

“Our 2013 performance was not what I expect from Shell. Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery”.

However, we may not get a great deal more detail, as van Beurden is just a month into the job and Shell has scheduled a strategy day for 13 March, which will provide a platform for laying out his vision.

One thing I’d be hoping to hear something concrete on in the results is the investment budget and asset-sale plans. As things stand, Shell has a net investment target of $130bn for the period 2012 to 2015. With $30bn spent in 2012 and the guidance of over $44bn for 2013, there’s less than $23bn a year for 2014 and 2015.


Shell has been a popular choice with dividend investors over the years. The company has so far paid three quarterly dividends of 45¢ for 2013. It’s the board’s practice to pay four equal dividends a year, so we can expect to see another 45¢ payout declared with the final results. The sterling equivalent is scheduled to be announced on 7 March.

Since 2010, Shell’s policy has been to grow the dollar dividend in line with management’s view of the company’s “underlying earnings and cash flow”. In setting the dividend, the board “looks at a range of factors, including the macro environment, the current balance sheet and future investment plans”.

Investors who hold the shares for income should keep a particularly sharp eye out for any change to the dividend policy, and its implication for future payouts.

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> G A Chester does not own any shares mentioned in this article.