Shell set to report £28.1bn surplus

Energy major Shell is expected to reveal pre-tax profits of about £28.1billion when it reports annual results on Thursday.

Although a massive profit haul, it is still more than £4billion behind the figure for 2011.

Alan MacPhee, an investment manager at financial-planning and wealth-management specialist Brewin Dolphin in Aberdeen, expected a “commendable” performance from Shell over the final quarter of 2012 and for it to beat some of its European rivals.

He added: “Shell has made little comment to analysts on any factors which may impact the quarter and as such we see a much wider range of estimates than usual ahead of the fourth-quarter numbers. Adjusted earnings per share is estimated around 62p. The comparable figure for the third quarter of 2012 was 66.4p a share.

“Royal Dutch Shell does of course report in US dollars so there will be an element of currency fluctuations in the figures. The quarterly dividend has already been pre-announced at 36.6p a share.”

Mr MacPhee expected the key fourth-quarter issues to focus around the extent to which downstream earnings have come under pressure, although he expected significant improvement on the losses incurred 12 months earlier. He added: “Downstream earnings could suffer from higher planned maintenance and weak refining and petrochemical margins, although this should be offset in part by product marketing.

“In terms of production figures, market expectations is for a figure of around 3.3million barrels equivalent per day for the quarter, compared to 2.98million in the third quarter and 3.3million for the fourth quarter 2011.

“More importantly for us and the wider market will be the upstream performance where there are several critical elements to watch out for: seasonal lift in gas production, the company’s ability to get its Qatar operations up to full utilisation and . . . the performance of the US business.

“Royal Dutch Shell has delivered leading cash-generation and profitability improvement in recent years. Key to sustaining this will be the company’s ability to reignite its growth profile to ensure it continues to remain at the forefront of the oil and gas sector. With a gross annual yield of around 4.9%, the shares remain an important holding for . . . investment managers and collective investment vehicles throughout the world.”