Must read: what to expect from Shell’s Q3 results

Shell

Richard Hunter, Head of Markets, interactive investor says, “Shell (LSE:SHEL) gets set to deliver its third-quarter update on Tuesday 7 October.

And investors will be hoping for more of the same next week from the oi major's Q3 numbers. Despite a decline of 11% in the oil price so far this year, Shell shares have managed a gain of 5.7% in an ongoing display of its financial resilience.

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At its second-quarter update at the end of July, Shell revealed quarterly profit that beat City forecasts, despite lower oil prices, a weaker contribution from trading activities and with ongoing cost savings of $800 million playing a part.

Quarterly profit of $4.26 billion was ahead of a consensus forecast of $3.74 billion, although down from the previous quarter’s $5.58 billion profit, impacted by a weaker economic backdrop.

The share buyback programme was maintained at $3.5 billion, while the dividend yield of 4% remains attractive to income-seeking investors. Despite heightened geopolitical tensions and a current glut of supply overhanging the sector, Shell is now undergoing more conservative capital expenditure, thus underpinning shareholder returns.

Shell’s diversity of operations across oil, gas, chemicals, and retailing regularly allows one area of strength to counter another of weakness. Management’s previous estimate that the dividend could be sustained even with the oil price as low as $40 per barrel - currently $66 – is noteworthy, while a focus on reducing costs continues.

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As a stock, Shell faces the additional challenge of being in a sector which is the focus of some debate from an environmental perspective, with the ever-increasing possibility that some investors will be unwilling or unable to invest in the sector on ethical grounds.

There may have been times over recent years when the old market adage, “never sell Shell”, was brought into question, but for the most part the group has ridden the inevitable economic waves with aplomb. Shell remains the preferred play in the sector over BP (LSE:BP.) and is an important constituent in many portfolios.