BP impressed with Q1 results. Can Shell?

BP reported a better than expected underlying replacement cost of $2.6 billion up from $115 million in Q4. Shell is due to report on Thursday, can it follow in BP's footsteps?

Charts (4)

BP announced better than expected earnings thanks to a strong rebound in the price of oil and an exceptional Q1 for its gas trading unit following the Texas freeze. Oil prices have climbed around 25% since the start of the year. 

BP reported underlying replacement cost (proxy for net profit) C of $2.6 billion up from $115 million in Q4 of 2020 and from $791 million in Q1 of 2020. 

Net debt also fell by $5.6 billion to $33.3 billion, crucially falling below BP’s $35 billion line in the sand to restart the share buyback scheme. The share buyback will resume in the current quarter at a cost of $500 million.  

BP had previously warned that Q1 could be challenging amid ongoing lockdown restrictions and travel restrictions. However, these numbers should serve to calm nerves. The covid vaccine rollout should help improve the outlook further, this was reflected in the International Energy Agency upgrading its oil demand forecast for 2021 by 6 million barrels a day. Market fundamentals are considerably stronger. 

BP share price rallied 2% across the session and trades + 18% year to date. 

What’s in store for Shell? 

In the wake of BP’s strong numbers, sector peer Shell is due to report on Thursday 29th April.  

Whilst rising oil prices bode well for Shell, the handling of the Texas freeze differs. As mentioned BP which has plenty of experience and a long history of handling disruption benefited from sky rocketing gas prices in the Texas freeze. Shell on the other hand has already warned that earnings will take a hit of about $200 million due to the freak weather conditions. 

Whilst Shell is expected to return to profit for the first time since the start of the pandemic, guidance is likely to be underwhelming. 

As with BP, Shell’s results come as it attempts to transition into a new cleaner energy giant, not an easy and certainly not a cheap task. Refocusing on cleaner energy is an expensive transition and one that must be paid for by traditional oil assets.  

Shell has under-performed BP substantially rising by just 4% so far this year against BP’s 18%. 

Learn more about trading equities

Where next for Royal Dutch Shell share price? 

Shell trades below its descending trendline dating back to early March. It trades below its 50 & 100 EMA on the 4 hour chart in a bearish trend. The RSI is also supportive of further losses. 

However, any move lower needs to clear support at 1290p a level which has support RDSB’s share price across the past week.  

A break through this level could see the price look towards 1227p February & April’s low. 

Should support at 1290p hold, buyers would need a move over 1320p, this week’s high and the descending trendline resistance to negate the current downtrend. Beyond here the 100 EMA at 1350p could offer some resistance. 


More from Equities

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.