Royal Dutch Shell Misses Earnings, Revs Down - Analyst Blog

By Zacks Equity Research,

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Europe's largest oil company Royal Dutch Shell plc ( RDS.A ) reported weak fourth quarter 2013 results due to high costs, lower output, supply disruptions in Nigeria and a drop in refining margin.

Hague-based Shell reported earnings per ADR (on a current cost of supplies basis) - excluding one-time items and gains or losses from inventories - of 93 cents. This was well below the Zacks Consensus Estimate of $1.33 and the year-ago adjusted earnings per ADR of $1.80.

Moreover, Shell's revenues were down 7.5% year over year to $109.2 billion.

The Hague-based group is the first of the integrated supermajors to come out with fourth quarter results. U.S. biggies Exxon Mobil Corp. ( XOM ) and Chevron Corp. ( CVX ) are scheduled to report later this week, while continental rival BP plc ( BP ) will release results next week.

For its fiscal year ended Dec 31, 2013, Shell reported profit (excluding one-time items and inventory changes) of $6.20 per ADR, failing to match the Zacks Consensus Estimate of $6.57 per ADR and down from $8.06 per ADR in 2012. Revenues of $451.2 billion were 3.4% down from the year-ago period.

Segmental Performance

Upstream: Upstream segment earnings during the quarter (excluding items) were $2.5 billion, down 43.7% from $4.4 billion (adjusted) earned in the year-ago period.

This primarily reflects the impact of lower liquids realizations, higher exploration expenses, increased operating costs, more number of maintenance projects, together with output disruptions in Nigeria. These factors were partly offset by output boost from the growth initiatives and higher LNG (liquefied natural gas) realizations.

Shell's upstream volumes averaged 3.3 million oil-equivalent barrels per day (MMBOE/d), down 4.8% from the year-ago period. Natural gas volumes declined 3.5%, while crude oil output was down 6.2% from the corresponding period last year. Crude oil contributed approximately 47% of Shell's 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 115 MBOE/d.

Shell's worldwide realized liquids prices were 6% below their year-earlier levels but natural gas realizations inched up 1% from the fourth quarter of 2012. In particular, natural gas prices in North America increased 4% from the last year's level.

LNG equity sales volumes of 4.93 million tons were down 10% from the year-ago quarter, as more planned downtime at a number of facilities were only partially offset by better operating performance.

Downstream: In the Downstream segment, the Anglo-Dutch super-major recorded a profit (excluding items) of $558.0 million as against $1.2 billion in the year-ago period. The negative comparison reflects the impacts of lower refining profitability (particularly in Asia and Europe), together with weak marketing and trading contributions.

To some extent, these factors were offset by strong contribution from the Motiva joint venture in the U.S. and better Chemical earnings.

Cash Flow

During the quarter under review, Shell generated cash flow from operations of $6.0 billion, returned $3.8 billion to shareholders through dividends/share buybacks and spent $16.3 billion on capital projects.

Balance Sheet

As of Dec 31, 2013, Shell had $9.7 billion in cash and $44.6 billion in debt (including short-term debt). Net debt-to-capitalization ratio stood at approximately 16.1%.

Brazilian Field Stake Sale

In a separate press release, Shell announced that it has sold 23% of its interests in the Brazilian offshore oilfield Parque das Conchas (BC-10) to Qatar's state-owned energy company for about $1 billion.

Zacks Rank

Royal Dutch Shell currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

BP PLC (BP): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: BP , CVX , RDS.A , XOM

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