Anglo-Dutch oil giant Royal Dutch Shell (LSE: RDSB)shocked the City with a profit warning last week. Some of the problems it discussed, such as loss-making shale gas projects in America and ongoing issues with oil theft in Nigeria, are not new.
However, Shell is also now making less money from refining (turning oil into other products) and selling petrol. Some of its high-value oil and gas fields have suffered from higher-than-expected costs and have been producing less than hoped too.
Yet it's always a good idea to watch the City's reaction to these sorts of warnings, and the reality is that no one seems to be particularly concerned the shares really haven't fallen much. So you can't help thinking that the new chief executive Ben vanBeurden is doing some clearing of the decks now so that lifemight be a little easier for him later on.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That said, Shell has a lot of work to do as it continues tounderperform its peers. It needs to stop spending money andfocus on getting more cash through the door. The companyknows this and is on the case.
It has some good assets, strongfinances and a decent dividend, which analysts expect to bemaintained. Providing oil prices stay between $80 and $100per barrel, Shell could be generating lots of surplus cash in acouple of years' time. This is not the time to sell.
Verdict: buy for dividends
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Should you be worried about energy windfall tax proposals?Analysis Calls have been growing for a windfall tax on UK oil and gas producers. It's a popular idea, but is it a good one? And what does it mean for investors in the UK's energy companies? Rupert Hargreaves explains.
-
The outlook for Shell shares is mixed, despite bumper profitsAnalysis With profits surging, it looks as if Shell is on a roll, but the company’s growth from here is hard to see as Rupert Hargreaves explains.
-
Investors can no longer be sure of ShellNews Oil giant Royal Dutch Shell, one of the market’s most reliable income providers, has cut its dividend for the first time in over 70 years. Matthew Partridge reports.
-
The Shell BG deal will be the first of many – which oil giant is next?Features Shell's takeover of BG Group will spark a wave of mergers in the energy sector. John Stepek asks – who will be next?
-
Today’s profit warning looks like a good time to buy ShellFeatures Shares in Shell took a hit after the company's profits warning. But that doesn't mean you should sell, says Antonia Oprita. In fact, now may be time to buy.
-
Three stocks to buy with future income in mindOpinion Professional investor Ben Ritchie picks three robust stocks that should generate a sustainable and growing dividend for future income.
-
Shares in focus: Can Shell deliver the goods?Features Oil giant Shell is out of favour with the City, but does its dividend yield make the shares worth buying? Phil Oakley investigates.
