Tuesday 27 April 2021 6:00 pm

Shell Q1 results: What to expect

After BP today gave the market “all it could have asked for”, attention will now turn to rival oil giant Shell ahead of Thursday’s first quarter results.

While the former firm came into the results trumpeting the fact that it would hit its debt reduction targets a year early, prompting the restart of share buybacks, the Anglo-Dutch firm had more sober news.

At the beginning of April it was revealed that February’s historic winter storm, which blanketed key oil state Texas, would cost it £145m in earnings.

It added that its upstream business would produce 10,000 to 20,000 barrels fewer a day as a result.

There was little that Shell could do about that, and though the firm reassured investors that profits would still be positive for the quarter, the announcement puts more pressure on its bid to reinvent itself as a clean energy giant.

Hargreaves Lansdown senior investment and markets analyst Susannah Streeter explains: “Shell is trying to make the transition through a radical restructuring, that aims to focus the group down onto core assets, shedding billions of dollars of non-core businesses and reduce its refining footprint.”

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She added that due to the storm, its green transition strategy would likely be the focal point of the upcoming results.

But the firm should also benefit from oil prices which are now lingering around pre-pandemic levels of $65 per barrel – like BP, which said it would make a surplus if prices remained above $45 per barrel.

But while BP’s profits trebled – beating forecasts by some way – analysts see Shell’s profit as likely to increase a tenth, to $3.1bn.

Investors will also be keeping an eye on Shell’s dividend, after last year’s historic cut. AJ Bell investment director Russ Mould explains:

“Shell slashed its dividend by two-thirds at this stage a year ago, to $0.16 from $0.47 but increased that slightly to $0.1665 by the fourth quarter, when [chief executive] Ben van Beurden targeted a payment of $0.1735 per share for Q1 2021. 

“The current analysts’ consensus forecast for the full year puts Shell on a forward yield of 3.7 per cent, while in cash terms it still expected to the the FTSE 100 index’s third-largest single dividend payer at £4bn (with BP in eighth at £3.1bn).”

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