An indifferent second quarter for Royal Dutch Shell fed through into a 27 per cent fall in first-half net income to $12.8bn (£8.32bn). The Anglo-Dutch group had to contend with a deteriorating oil and gas market, and the consequent results came up well short of analysts' estimates. However, the shares were only down marginally on the previous day's close, perhaps because pre-exceptional earnings were actually static on a current cost-of-supplies basis. Although Shell is not immune to external events that are currently weighing on oil and gas prices, its share price performance in coming months will be predicated to a large extent on the success of the ramp-up at its Pearl GTL plant in Qatar and the signs there are positive.
Daily production ticked up by 2 per cent on the first half of 2011 to 3.33m barrels of oil equivalent (BOE), with natural gas production up by 5 per cent. New field start-ups and Pearl GTL contributed some 205,000 BOE of new daily production during the second quarter, which shows that Shell's investments to offset the impact of mature field declines are bearing fruit. However, the market is probably growing impatient with the group's cash flows. Shell is on track to spend $32bn this year, and if you exclude working capital, second-quarter cash flow of $9.5bn barely covered capital investment of $8.1bn (excluding $1.8bn of disposals) and the quarterly dividend of $2.8bn.
RBC anticipates 2012 EPS of 406¢ (397¢).
| ROYAL DUTCH SHELL (RDSB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,211p | MARKET VALUE: | £138bn* | |
| TOUCH: | 2,211-2,212p | 12-MONTH HIGH: | 2,499p | Low: 1,768p |
| DIVIDEND YIELD: | 5% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 2,819¢* | NET CASH: | 9% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 231 | 31.3 | 285 | 84 |
| 2012 | 237 | 25.3 | 205 | 86 |
| % change | +3 | -19 | -28 | +2 |
Ex-div: 8 Aug Payment: 20 Sep £1=$1.55 *Market capital reflects both 'A' and 'B' shares | ||||
