29th October 2015
As Royal Dutch Shell reports its third quarter results Helal Miah, investment research analyst at The Share Centre, explains what the numbers mean for investors…
Royal Dutch Shell’s third quarter results painted a picture very much reflective of the woes of the oil industry, as revenues fell by 36% to $68.7bn.
This resulted in leaving the group with a huge loss of $6.1bn, compared to a profit for the same period last year of $5.3bn.
However, investors should be aware that these figures included non-cash identified items such as adverse currency movements on deferred tax positions, financing items and large asset write-downs.
Stripping these out gave a more palatable earnings figure of $1.8bn, but this was still a 70% fall on the same period last year.
As expected, the upstream business was affected by lower oil and gas prices, partly offset by cost efficiencies and higher production. However, investors should acknowledge that the downstream parts of the business, such as refining, benefitted from higher margins.
Whilst these results are a little disappointing, we believe Royal Dutch Shell is taking the right steps in a low oil price environment, reigning back on large scale investment projects and cutting costs. As a result, we recommend the company as a ‘buy’ for investors seeking income.
The takeover of BG Group should further the group’s plans and help it to focus on more profitable areas such as deep-water and integrated gas. Furthermore, we believe one of the key reasons to invest in the company is its dividend, for which the company looks to continue with for the time being.