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Shell Set To Book Highest Profit Since 2014

Cash

Royal Dutch Shell (NYSE:RDS.A) is expected to report on January 31 its highest annual profit since 2014, although the oil price plunge late last year may hit Q4 earnings.

Shell is forecast to report next Thursday a 39-percent yearly jump in earnings on a current cost of supplies (CCS) basis—its closest metric to a net profit closely watched by analysts—to US$21.9 billion, Press Association reports.

If Shell meets those estimates, it would book its highest annual profit since oil prices started crashing in 2014. Yet, fourth-quarter earnings may fall below expectations and below the Q3 profit, due to the massive sell-offs in oil between October and December last year, analysts say.  

According to analyst estimates of more than 20 analysts, the consensus for full-year 2018 CCS earnings is US$20.980 billion, with a high of US$21.989 billion and a low of US$20.325 billion.

Fourth-quarter earnings estimates range from US$4.635 billion to US$6.273 billion, with the consensus at US$5.280 billion.

As widely expected, higher oil prices boosted earnings and cash flows at Shell in the third quarter in a somewhat mixed results release, which highlighted strong cash flow generation and continued share buybacks.

Despite slightly missing estimates, Shell’s earnings in Q3 were the highest in four years on the back of rising oil prices.

“Shell will find it tough to match the third quarter’s (Q3) storming quarter, which saw its highest adjusted cash flow in over ten years. The Q4 is currently expected to be very strong as well, but given recent volatility and the rout in the oil price, things may not turn out as well as hoped,” trading provider IG said.

Related: French Total To Enter Saudi Downstream Business

According to the Share Centre: “[G]iven the anticipation of higher supplies from shale and Iranian oil supplies not expecting to fall back as dramatically as previously expected, oil prices during the final quarter wobbled which will no doubt hit Shell’s numbers.”  

“Investors though will still expect solid free cash flows and hope that gearing level shave down a little further. For 2018 as a whole revenues and profits should easily breach previous highs set back in 2013 especially since costs have been cut back dramatically,” the Share Centre said.

By Tsvetana Paraskova for Oilprice.com

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