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Shell share price: Q3 earnings to fall 55 percent, analysts say

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Company has “ample room to weather the storm”

by Veselin ValchevMonday, 26 Oct 2015

On Thursday, Royal Dutch Shell Plc (LON:RDSA) is expected to post a 55 percent drop in quarterly earnings to £2.65 billion for the three months ended September 30, analysts’ consensus holds.

The slump due to the significantly lower oil price year-on-year will be exacerbated by Shell’s withdrawal from its costly Alaskan adventure. While not specifying the extent of the expected impact, the company noted last month that its Arctic position is worth about $3 billion (£1.97 billion), while it also has about $1.1 billion in “future contractual commitments”. To date, Shell has spent about $7 billion towards furthering its Arctic ambitions.

Still, analysts noted that with a fresh set of modest cuts to capital spending, the company would be well geared for a prolonged period of depressed oil prices.

“On our numbers, at $50-a-barrel oil and a further 10 percent reduction to capex, Shell will add 3 percent to its [debt] gearing each year,” RBC analysts said. “We see ample room to weather the storm.”

Shell’s share price had climbed 0.17 percent to 1,765.00p as of 08:29 GMT today, outperforming the FTSE 100 which had dipped 0.5 percent in the red. Month-on-month, Shell’s stock is up more than 13 percent.

Before Shell’s report on Thursday, top London-listed rival BP is due to release its own Q3 figures tomorrow. Analysts have projected that BP will post a 60 percent drop in earnings, stirring speculation that the firm’s dividend could be in line for trimming.

On Friday, smaller FTSE 100-listed oil peer and Shell acquisition target BG Group is also reporting quarterly performance. Analysts expect a massive 80 percent slump in the firm’s earnings.

Shell has advanced its bid to acquire its London-based competitor past the regulatory approval processes in the US, EU and Brazil. The merger is still awaiting rulings in Australia and China, which could prove to be problematic. Last week, Australia’s regulator postponed its decision by a further week to November 19, following a two-month delay in September.

As of 09:05 GMT, Monday, 26 October, Royal Dutch Shell Plc ‘A’ share price is 1,763.50p.

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