Fall In Profits For Royal Dutch Shell plc Leads To Changing Emphasis

Royal Dutch Shell plc (LON: RDSB) also plans to speed up rate of asset disposal.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 30 January, 2014 8:49 am GMT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The shares of Shell (LSE: RDSB) (NYSE: RDS.B.US) added 34p to 2,160p during early trade this morning after the oil company — which revealed a shock profit warning earlier in the month — announced that it is stepping up asset disposals as part of a new strategy.

For the last quarter of the year Shell posted profits of £1.7 billion, down on £3.4 billion for the same period in 2012. Full-year profits were taken to £11.8 billion against just north of £15 billion for 2012.

The FTSE 100 member added that capital expenditure will fall to £22 billion this year, from a little under £28 billion last year. A controversial exploration programme in Alaska will also be scrapped. Asset sales will be speeded up with a target of £9 billion.

Shell also announced today that its first quarter interim dividend will be 28p per share. This is an increase of just north of 4% on the same period last year, coming as the company expressed confidence in its ability to increase free cash flow.

Dividends can be received either in cash or they can be reinvested automatically into more Shell shares through its dividend reinvestment plan.

Chief executive, Ben van Beurden, had the following to say:

“Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas.”

“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance”

Prior to today City experts were predicting Shell’s upcoming annual results to show earnings equivalent to 215p a share. Following today’s price movement , the shares may therefore trade on a P/E of 10.

The decision to ‘buy’, based on those ratings, today’s results and the wider prospects for the oil industry, is solely your decision.