Results preview: Shell and BG

Just a week before shareholders vote on one of the biggest oil mergers of recent times, both Royal Dutch Shell and BG Group are preparing to publish fourth-quarter and full-year updates. Analysts at Deutsche Bank have flagged up the numbers they want to see hit the screens Wednesday morning.

Don't expect any detailed operational comments or guidance, but Deutsche expects Shell to have made headline net income of $1.7 billion (£1.2 billion) in the three months to December. City consensus estimates are for $2 billion.

Shell's upstream division - exploration and production, or E&P - is tipped to make a small loss versus consensus estimates of breakeven on production of 3.2 million barrels per day (mb/d). Shell Upstream Americas is expected to lose about $1.1 billion.

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But Deutsche thinks the downstream business - refining and processing - should offset some of this disappointment. It expects net income here of $1.7 billion (consensus $2 billion), although that's also sharply down on the $2.6 billion made in the third quarter, reflecting both seasonal weakness in global refining margins and trading activities.

At BG, Deutsche Bank pencils in "very strong operational performance" with fourth-quarter output tipped to increase 14% year-on-year to 737,000 barrels of oil equivalent per day (kboe/d). That's 17,000 barrels ahead of consensus forecasts, and reflects both better-than-expected volumes in Brazil and "excellent" ramp at BG's Australian QGC (Queensland Gas Company) liquefied natural gas (LNG) facility.

"Overall, financial performance is, however, expected to show the ravages of the commodity environment with net income of $54 million (consensus $154 million) substantially down on the $983 million achieved in Q4 2014," reckons Deutsche.

Shell shareholders vote on the proposed merger with BG on 27 January. BG shareholders get their chance a day later.

Detailed full-year results will be confirmed in a further statement a week after the shareholder vote. They should also confirm a fat dividend and 9% yield. Shell has already promised to pay $1.88 a share for 2015 and 2016.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.