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Shell Q4 earnings preview – oil giant shrugs off recent impairment


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Despite a recently-announced impairment to its profit forecast, Shell is expected to report stronger trading.

ShellSource: Bloomberg
 

 Written by: Chris Beauchamp | Chief Market Analyst, London | Publication date: 

Shell earnings – what does the City expect?

Shell is set to release its fourth-quarter (Q4) results on February 1. The current estimate for the quarter is a profit of $1.90 per share with revenue of $89 billion.

What about Shell’s recent trading?

Shell has recently announced that its Q4 profits will be impacted by a non-cash impairment charge of $2.5−$4.5 billion.

This charge primarily stems from the Singapore refining and chemicals hub, which Shell intends to sell. The decision to sell its Singapore Chemicals & Products assets, including a refinery and an ethylene plant, is a significant contributor to this impairment charge.

Despite the impairment charge, Shell remains optimistic about its quarterly performance. The integrated gas trading and optimization sector is expected to see a substantial increase from the previous quarter, and the company forecasts a production range of 880,000-920,000 barrels of oil equivalent per day from this unit.

In the upstream business, Shell expects production in the range of 1.83-1.93 million barrels of oil equivalent per day for the Q4. These forecasts indicate a resilient operational performance.

Analyst ratings for Shell

Refinitiv data shows a consensus analyst rating of ‘buy’ for Shell with 3 strong buy, 7 buy and 2 hold – and a mean of estimates suggesting a long-term price target of €39.10 for the share, roughly 34% higher than the current price (as of 30 January 2024).

Shell analystSource: Refinitiv

Technical outlook on the Shell share price

Shell’s share price, which has fallen by around 3% since the beginning of the year, and by around 14% from its October 2023 €32.64 peak, is seen stabilizing.

Shell Monthly Candlestick Chart

Shell Monthly Candlestick ChartSource: TradingView

The Shell share price topped out in October of last year in a similar area to where it did so in September 2014 and May 2018 with the whole €32.64 to €32.945 representing a major resistance zone.

The 5% recovery in the Shell share price from its €27.755 current January low has taken it back above the 200-day simple moving average (SMA) at €28.97 with the October and December lows at €29.090 to €29.185 acting as minor resistance.

Shell Daily Candlestick Chart

Shell daily chartSource: TradingView

If overcome, the 55-day SMA at €29.608 should be in play but only a much further advance to above the €30.96 early-January high would negative the last three months’ bearish play. Only then could the major €32.64 to €32.945 resistance zone be back on the cards.

Good support below the 200-day SMA at €28.967 can be found between the mid-August to current January lows at €27.755 to €27.71.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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