Europe's largest oil company
Royal Dutch Shell plc
) reported weaker-than-expected fourth quarter 2012 earnings,
pulled down by depressed North American fuel prices.
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Earnings per ADR (on a current cost of supplies basis), excluding
one-time items and gains or losses from inventories, came in at
$1.78, below the Zacks Consensus Estimate of $2.11.
However, comparing year over year, Shell's adjusted earnings per
ADR improved 14.8% (from $1.55 to $1.78), while revenues were up
2.1% to $118.0 billion, reflecting stronger refining margins.
The Hague-based group is the first of the integrated supermajors
to come out with fourth quarter results. U.S. biggie
Exxon Mobil Corp.
) is scheduled to report tomorrow, while continental rival
) will release results next week.
For its fiscal year ended Dec 31, 2012, Shell reported profit
(excluding one-time items and inventory changes) of $8.02 per
ADR, failing to match the Zacks Consensus Estimate of $8.48 per
ADR but up from $7.94 per ADR in 2011. Revenues of $467.2 billion
were 0.6% down from the year-ago period.
Upstream segment earnings during the quarter (excluding items)
were $4.4 billion, down 14.3% from $5.1 billion (adjusted) earned
in the year-ago period.
This primarily reflects the impact of lower liquids realizations
in North America, higher depreciation and exploration expenses,
together with increased operating costs. These factors were
partly offset by higher contribution from Integrated Gas,
improved equity LNG pricing and output, and an increase in LNG
Upstream volumes averaged 3.4 million oil-equivalent barrels per
day (MMBOE/d), up 3.3% from the year-ago period. Natural gas
volumes rose 6.8%, while crude oil output remained almost flat
from the corresponding period last year. Crude oil contributed
approximately 48% of total volumes, while natural gas accounted
for the rest.
Production during the quarter compared with the year-ago quarter
included volumes from new field start-ups and the continued
ramp-up of existing fields, which boosted output by roughly 235
Shell's worldwide realized liquids prices were 1% below the
year-earlier level, while natural gas realizations increased by
3%. However, natural gas prices in North America fell 4% from the
last year's level.
LNG equity sales volumes of 5.49 million tons were 13% higher
than the year-ago quarter, mainly due to contribution from the
Pluto LNG development in Australia and higher output from the
Qatargas 4 project.
In the Downstream segment, the Anglo-Dutch super-major recorded a
profit (excluding items) of $1.2 billion as against a loss of
$278 million in the year-ago period. The turnaround reflects the
impacts of higher refining profitability, the company's improved
operating efficiency and solid marketing and trading
To some extent, these factors were offset by lower Chemical
During the quarter under review, the group generated cash flow
from operations of $9.9 billion, returned $3.3 billion to
shareholders through dividends/share buybacks and spent $12.8
billion on capital projects.
More importantly, Shell announced that it expects to hike its
dividend by 4.7% from next quarter
As of Dec 31, 2012, the group had $18.6 billion in cash and $37.8
billion in debt (including short-term debt). Net
debt-to-capitalization ratio stood at approximately 9.2%.
Royal Dutch Shell currently retains a Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
Meanwhile, one can look at
) as an attractive investment. The France-based supermajor -
sporting a Zacks Rank #1 (Strong Buy) - offers tremendous value
and is worth accumulating at current levels.