The Observer (UK): Shell to make history with $18bn profit: “Despite last year being the Anglo-Dutch group's 'annus horribilis', thanks to the reserve downgrades scandal, it is expected to report its best-ever results.”: “The pre-tax profit figure will be even larger - up to $32bn…”: (ShellNews.net) 30 Jan 05
Oliver Morgan and Richard Wachman
Sunday January 30, 2005
Oil giant Royal Dutch/Shell will this week unveil the largest profit in UK corporate history. Income after tax will climb to around $17.5 billion, and is likely to exceed the takings of its arch-rival BP, which reports the following week.
Despite last year being the Anglo-Dutch group's 'annus horribilis', thanks to the reserve downgrades scandal, it is expected to report its best-ever results. These will exceed previous corporate highwater marks reached by banking group HSBC, which made £7.7bn last year.
The pre-tax profit figure will be even larger - up to $32bn - but analysts do not focus on this because oil companies treat taxes paid in the countries in which they operate differently, so comparison is difficult.
But some forecasters believe Shell's after-tax number could exceed $18bn, and that the company will promise to hand back cash to shareholders via a share buyback or special dividend worth between $2bn and $5bn.
Shell's profits are expected to be about $1bn ahead of BP's. BP chairman Lord Browne stirred controversy last week when he said the group's cashflow was 'staggering'.
The performance comes on the back of last year's sustained period of high oil prices, thanks to a surge in demand from China, instability in the Middle East and supply disruption and capacity shortages.
But consumer groups are unlikely to slate oil companies for profiteering as a price war has erupted on garage forecourts after supermarket groups Morrisons and Tesco slashed petrol prices. The oil majors have followed suit.
Analysts are expecting Shell's net income to be $4bn to $5.5bn in the fourth quarter, and between $16.4bn and $17.9 for the year.
This is despite production volumes falling in the fourth quarter, although refinancing margins were strong.
Meanwhile, investors are anticipating further news on the reserves question. In the autumn the company said it might have to add another 900 million barrels of oil to the 4.47 billion it took out of its proven reserves last year.
Analysts are expecting it will have to confirm this figure, derived from an audit of 55 per cent of total Shell reserves, and are likely to have to add to it, following inspection of the remaining 45 per cent. Sanford Bernstein analyst Neil McMahon believes there will be an increase in the figure. 'If it is from their big fields they would find the same problems. I would have thought there was more to come.'
A further 142 million barrels of oil will have to be taken out of proven reserves because of a downgrade in Canadian bitumen reserves.