Financial Trading Blog

Stock of the day 29/01/2016 – Royal Dutch Shell PLC



It’s not a particularly pleasant time to be an oil giant; yet can Shell continue on its current rebound (though any slight recovery must be taken in the larger context of the company’s decline) with its fourth quarter and full year figures next Thursday?


After beginning to bounce back as September turned into October, reaching £18 for the first time since August, Shell’s nascent rise was ended by its third quarter results after it revealed a whopping loss of $7.4 billion for Q3 (to really put the company’s position in context Shell posted a $4.5 billion profit just a year before) and a $4 billion fall in year-on-year profit to $1.8 billion.

This helped Shell resume its fall, and by the middle of November the stock was trading just under the £16 mark. The start of December saw things get worse, and after hitting £14.15 (a price not seen since April 2009) the company finished out 2015 at £15.28. Of course the 2016 was awful market-wide, and helped send Shell to fresh lows of £12.56 (its worst position since October 2008) by the middle of January. However, Shell has climbed away from that nadir since then, and now sits at a current trading price of £14.93 (It-Finance.com, 29/01/2016).

Royal Dutch Shell Chart January 2016
(Source: IT-Finance.com 29/01/2016)

Part of the reason for Shell’s recent rebound has been Brent Crude lifting away from its sub-£30 per barrel lows to (a still woeful) $35 per barrel. However, there has also been the final approval for the company’s $52 billion takeover of BG; shareholders voted 83% to 17% to approve the deal, with BG shareholders voting 87% to 13% in favour of the acquisition a day later. Many had questioned the wisdom of the deal in light of just how far oil has fallen since it was first announced; however, it appears that, for the moment at least, the merger has a substantial backing from both companies.

In terms of Shell’s latest results, the staggering loss last quarter means the company’s full year figures will make for interesting reading next Thursday, with 2015 write-offs nearing a total of $7 billion alone. Shell warned in mid-January that it expects a 50% drop in Q4 profits to around $1.6-1.8 billion, with full year earnings potentially as low as $10.4 billion. Any details on the minutiae of the BG takeover will likely also be welcome.

Royal Dutch Shell PLC has a consensus rating of ‘Buy’ with an average target price of £19.21.

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