Shell Q4 earnings preview – oil giant shrugs off recent impairment

[MongiIG]

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

Source: Bloomberg

 

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 Written by: Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 30 January 2024 17:28

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).

Source: 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

Source: 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

Source: 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.

 

 

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