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Shell (RDS.A) to Report Q3 Earnings: What's in the Cards?

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Royal Dutch Shell PLC (RDS.A - Free Report) is set to report third-quarter 2019 results on Thursday Oct 31, before the opening bell.

The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of 98 cents, having been revised upward 6.5% in the past 30 days.

Given this backdrop, let’s delve into the factors that might have influenced the company’s performance in the September quarter.

Factors at Play

Upstream

Management projects upstream production between 2,600 and 2,650 thousand barrels of oil equivalent per day (boe/d), indicating a slight decline from the year-ago figure of 2,672 thousand boe/d. Compared with the prior-year quarter, the company expects additional $250-$350 million of well write-offs in the third quarter.

Apart from lower output, the company’s upstream results are expected to reflect the impact of modest oil and gas prices.

Downstream

The company predicted third-quarter oil product sales in the range of 6,700-7,350 thousand barrels per day assuming that the upper end of the estimate must have met. This indicates a 10% increase from the number reported in the third quarter of 2018. Meanwhile, management expects a marginal fall in its chemical sales volumes.

However, this Netherlands-based company anticipates its refinery availability between 90% and 92%. Last month, Shell successfully divested its SASREF refining joint venture. Consequently, the oil and gas super major estimates a decline in chemical sales from 4.1 million tons in the third quarter of 2018 to 3.9-4 million tons in third-quarter 2019.

Integrated Gas

The company envisioned better third-quarter LNG liquefaction volumes, indicating a 10-14% increase from the year-ago reported figure. Moreover, its segmental production is forecast in the 930-960 thousand boe/d band. In the year-earlier period, Shell produced 924 thousand boe/d.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Shell this season. The combination of a positive  Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: Shell has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Shell currently has a Zacks Rank #3 (Hold).

Highlights of Q2 Earnings & Surprise History:

Shell, which is Europe’s largest oil company reported earnings per ADS (based on current cost of supplies excluding items. This represents the market’s preferred measure) of 86 cents, below the Zacks Consensus Estimate of $1.22 and also the year-ago earnings of $1.12. This worse-than-expected bottom line could be attributed to moderate oil and gas prices.

The energy player reported revenues of $91.8 billion, which were 7.5% lower than second-quarter 2018 sales of $99.3 billion. However, the figure marginally beat the Zacks Consensus Estimate of $91.6 billion on scaled-up production.

As far as earnings surprises are concerned, this Hague-based company’s earnings trumped the Zacks Consensus Estimate in two of the trailing four quarters, the average negative surprise being -1.31%. This is depicted in the graph below:

Royal Dutch Shell PLC Price and EPS Surprise

Royal Dutch Shell PLC Price and EPS Surprise

Royal Dutch Shell PLC price-eps-surprise | Royal Dutch Shell PLC Quote

Stocks to Consider

While earnings beat looks uncertain for Shell, here are some companies from the energy space worth considering on the basis of our model, which shows that these have the right combination of elements to beat on earnings in the upcoming quarterly reports:

Concho Resources Inc. (CXO - Free Report) has an Earnings ESP of +1.91% and a Zacks Rank of 3. This independent oil and gas explorer and producer is scheduled to release earnings on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gulfport Energy Corporation (GPOR - Free Report) has an Earnings ESP of +3.57% and a Zacks Rank of 3. This Oklahoma-based company engaged in the acquisition, exploration, development and production of oil and natural gas properties in the United States is scheduled to release earnings on Oct 31.

Cheniere Energy, Inc. (LNG - Free Report) has an Earnings ESP of +11.77% and is a #3 Ranked stock. This Houston-based energy company is scheduled to release earnings on Nov 1.

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