In its usual teaser ahead of quarterly results Shell is flagging a big loss – but there is a reason investors are brushing this news off.
The anticipated loss is a quirk of accounting – reflecting one-off tax charges which could well be the result of booking the impact of future windfall taxes upfront. Based on the performance of the company’s other business units you would still expect Shell to be generating plenty of cash to fund its dividend.
Danni Hewson from AJ Bell said: “Volumes in its liquefied natural gas business are expected to be higher and its oil products division is also performing well.
“A recent spike in oil prices on OPEC production cuts should be giving Shell a boost, although not one which will be reflected in these results.
“Shell and the rest of the peer group must balance the temptation to take advantage of strong commodity prices today and reward shareholders with generous returns of capital with a need to future-proof their businesses.
“Regardless of the energy transition, oil and gas are inherently cyclical and a global recession could hit demand.
“A significantly larger contribution from Shell’s renewables unit is a sign of some progress but proportionally this remains the equivalent of a tiny seedling in a big pile of mud.”