Earnings suffer but Royal Dutch Shell remains attractive for investors
As oil giant Royal Dutch Shell updates the market with disappointing Q2 figures, Helal Miah, investment research analyst at The Share Centre, explains what they mean for investors.
"Royal Dutch Shell's share price has taken a hit this morning, falling by more than 3%, as the company's Q2 earnings fell short of market expectations. It announced earnings of $5.7bn, measured on a current cost of supplies basis, against $6.6bn for the same period last year, a 13% decrease. The market consensus figure was approximately $6.3bn. Royal Dutch Shell cited that weaker oil and North American gas prices offset the benefit of increased upstream volumes and improved refining margins.
"The group's capital investment program has increased operational uptime, performance and costs. Investors will be pleased to hear that these programs should help drive oil and gas production growth for many years to come. There are currently 20 major upstream projects under construction and we believe this will help increase production capacity and keep costs under control. The company continues to look at offloading no-core operations to build high potential exploration acreage, including shale and deep water fields.
"Despite the earnings shortfall due to factors out of the company's control, we still recommend Royal Dutch Shell ‘B' as a ‘buy' to represent a core holding in an investor's portfolio. The company provides attractive yields and exposure to the energy market. It is hungry to find more resources and the projects it is undertaking should ensure it is well positioned to make the most of energy price rises, if the global economy manages to show some decent growth."