Shell's earnings disappoint, though cash flows rise

So, while fourth-quarter consolidated shareholder earnings declined by 44 per cent year-on-year, operating cash flow increased 69 per cent to $9.2bn (£7.3bn). This latter result, boosted by stronger income and favourable adjustments, was all the more impressive given negative working capital movements. Contrary to usual seasonal trends, the company managed to outdo third-quarter operating cash flows of $8.5bn.

In addressing last year's weak profitability, management cited a previously unidentified $0.5bn tax charge. A further $505m corporate charge was a similarly unwelcome surprise. Operationally, the main source of disappointment was the downstream division, where full-year earnings contracted 36 per cent on lower trading and refining margins, and higher taxation. Liquefied natural gas (LNG) also struggled in 2016, despite a post-BG surge in sales volumes. Weak LNG prices and higher start-up costs at the enormous Gorgon project in Australia meant full-year earnings in the integrated gas segment were down a fifth, to $2.5bn.

Meanwhile, the asset disposal programme appears to be turning a corner, and following sales in the North Sea and Thailand, Shell has now announced $10bn of divestment, with a further $5bn in progress. This helped reduce quarter-on-quarter gearing, albeit fractionally, for the first time since 2014.

Consensus market forecasts are for pre-tax profits of $22.5bn and adjusted EPS of 188¢ in 2017, up on overly confident predictions of $10.1bn and 103¢ last year.