Shell-BvB at the kitchen sink…

A very quick comment on the Shell profit warning with more later but incoming CEO Ben van Beurden has, probably correctly, decided to clear the decks and leave himself a decent starting point to what might be ten years in the job.

So, lets say that about half of the warning is justified on trading grounds with bad news in most areas. Upstream, the trend to higher exploration expenses continues and volumes were lower than expected in most areas even including GTL and LNG. Other contributory factors were the strong aussie dollar and the state of affairs in Nigeria.  Downstream, conditions were poor and interestingly in Asia and the pacific rim, I suspect that as has been mentioned before that his reference to maintenance activity being higher both up and downstream may have affected high margin products.

The market has only taken the shares down 4% as I write and it probably suspects that this move is a tad on the cynical side coming as it does from a new CEO just before the reporting season. If however, it means that Shell is in for a bit of radical restructuring and better capital efficiency then that’s not a bad thing and a sub 10% fall in the share price is a price worth paying.  Don’t forget that Shell spent $15.8bn in the 4th quarter making $44.3 bn for the year and is still only 16% geared.

I was hoping that a fall to around 2150p  would give a decent buying opportunity, it may not even be that low, lets see how the market takes it this morning. You may just have to get up a little earlier in the morning BvB if you are going to catch the market out!

More later in the blog when we shall assess market reactions…