(Alliance News) - Royal Dutch Shell on Friday guided for a potential major impairment based on "the macro outlook".
Shell is to book a post-tax impairment of USD1.7 billion to USD2.3 billion for the fourth-quarter of 2019, based on macroeconomic conditions, without giving any further details.
The oil major, London's largest listed company by market capitalisation, also guided for a number of other charges which are set to hit fourth-quarter earnings.
In the Upstream unit, Shell will book USD100 million to USD200 million charges related to well write-offs, as well as a USD500 million to USD600 million deferred tax charge.
Production in the segment for the last quarter of 2019 is guided between 2.78 million and 2.83 million barrels of oil equivalent per day. Production in all of 2018 was around 2.7 million barrels a day.
Shell said refining margins in the Downstream business are still weak, due to weak macroeconomic conditions, with marketing margins to be lower due to seasonal trends.
In Integrated Gas, Shell sees production between 920,000 and 970,000 barrels of oil equivalent per day. Trading performance in the last quarter is expected to be "average", and in line with 2019's second quarter.
On the capital expenditure front for the full year, Shell sees the figure at the lower end of its USD24 billion to USD29 billion guided range for 2019.
Shell A shares were down 0.7% early Friday in London, B shares down 0.9%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.1% at 7,581.85
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Hang Seng: marginally higher at 27,813.55
Nikkei 225: closed down 0.2% at 23,816.63
DJIA: closed up 137.68 points, 0.5%, at 28,376.96
S&P 500: closed up 0.5% at 3,205.37
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GBP: flat at USD1.3012 (USD1.3015)
EUR: flat at USD1.1117 (USD1.1111)
Gold: flat at USD1,478.90 per ounce (USD1,476.20)
Oil (Brent): flat at USD66.66 a barrel (USD66.50)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's Key Economic Events still to come
0930 GMT UK public sector finances,
0930 GMT UK third quarter gross domestic product
0930 GMT UK balance of payments
1100 GMT Ireland wholesale price index
1000 CET EU euro area balance of payments
1600 CET EU flash consumer confidence indicator
0830 EST US 3rd estimate GDP
1000 EST US personal income and outlays
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Boris Johnson faced accusations he had "binned" his withdrawal deal compromises in favour of a hard Brexit as MPs prepare to vote on his exit terms. As part of his general election pledge to have Brexit "decided" by Christmas, the UK prime minister will bring back the EU (Withdrawal Agreement) Bill for its second reading in the House of Commons on Friday. After Mr Johnson won a landslide at the general election and secured an 80-seat majority, the vote in the afternoon is expected to pass without a hitch for the Government and lay the ground for a January exit from the EU. The Conservative Party leader said his Brexit Bill, along with his plans for Government, announced in the Queen's Speech on Thursday, would bring about a "new dawn" for Britain.
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Andrew Bailey, the head of the Financial Conduct Authority, is set to be announced as the next governor of the Bank of England, it has been reported. The Financial Times said the selection of Bailey, former deputy governor of the Bank, could be announced by Chancellor Sajid Javid as early as Friday. The next governor is due to start in early February, after incumbent Mark Carney steps down on January 31. The Treasury recruited a specialist headhunter to fill the GBP480,000-a-year post, with candidates expected to commit to at least eight years on the job. Other contenders included London School of Economics director Minouche Shafik, Santander UK chairwoman Shriti Vadera and former member of the US Federal Reserve's board of governors Kevin Warsh.
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US Treasury Secretary Steven Mnuchin said Thursday he had no doubt Washington and Beijing will sign a new partial trade agreement next month, marking a truce after nearly two years of conflict. "I'm very confident," Mnuchin told CNBC. "It's just going through what I would consider to be a technical legal scrub and we'll be releasing the document and signing it in the beginning of January," he said in an interview on the White House lawn. "It's already on paper and it's already translated," he said. "It's not that it's open to renegotiation or that there are any open issues."
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Japan's consumer prices were up 0.5% from a year earlier in November, the government said. In October, prices were up 0.2% year-on-year. The latest figure remained far off the 2% inflation goal set by the Bank of Japan more than six years ago when it launched a monetary easing campaign. The inflation rate for the year of 2018 rose 0.9% from the previous year as higher energy prices had supported the rises. However, energy prices fell 2.1% year-on-year in November, according to the Ministry of Internal Affairs & Communications. The core consumer price index, which excludes fresh food, stood at 102.2 against a base of 100 for 2015, the ministry said.
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BROKER RATING CHANGES
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HSBC CUTS SEGRO TO 'HOLD' ('BUY') - TARGET 869 (840) PENCE
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MACQUARIE REINITIATES PRUDENTIAL WITH 'OUTPERFORM' - PRICE TARGET 1790 PENCE
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COMPANIES - FTSE 100
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AstraZeneca announced the USD181 million sale of the rights to Arimidex and Casodex in Europe, Africa and certain other countries. The drugs, which are mainly used to treat breast and prostate cancer, have been sold to Juvise Pharmaceuticals. AstraZeneca sold the rights to the drugs in the US in 2017.
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COMPANIES - FTSE 250
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Greencoat UK Wind has bought two Scottish wind farms, Windy Rig and Twentyshilling, for a combined GBP104 million.
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LondonMetric Property has disposed of two mega box warehouses and two regional distribution centres for a combined GBP145.3 million, adding the price is a 2.6% discount to book value as of September 30.
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The UK's largest listed landlord Grainger has secured planning to redevelop a housing estate in Lambeth, London, which will see it deliver 215 new homes. Originally, it had planned to build 69 new homes at the site near Waterloo station.
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The UK Competition & Markets Authority said it is minded to accept remedies to competition concerns put forward by Stonegate, which is trying to buy pub company Ei Group for GBP1.3 billion.
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COMPANIES - OTHER MAIN MARKET AND AIM
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South32 said it has exercised its option to acquire a 50% interest in a joint venture company that will own the Upper Kobuk mineral projects, located in northwest Alaska. The company said the reminder of the joint venture will be held by Trilogy Metals, which will contribute all of its assets associated with the project. In turn, South32 said it will contribute USD145 million to the joint venture. Establishment of the new entity is expected to occur in February 2020, South32 said, and follows an initial exploration partnership between South32 and Trilogy Metals over three field seasons to advance both parties' geological understanding of the project. Following formation, the joint venture will retain USD87.5 million of the USD145 million subscription payment to fund its activities and exploration programmes with the remaining USD57.5 million loaned back to South32.
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Waste-to-product business Renewi said it is "delighted" with a Dutch government decision to lift a ban on thermally treated soil, following a period of testing. Renewi said its ATM facility in the country has a "strong" pipeline of customers who plan to use thermally treated soil at their locations.
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COMPANIES - INTERNATIONAL
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Spain's Banco Bilbao Vizcaya Argentaria said it expects to take a USD1.5 billion hit from a goodwill adjustment in its US unit. "This adjustment is caused mainly by the negative evolution of interest rates, in particular during the second half of the year, which together with the slowdown of the economy, result in a lower forecasted evolution in future profits as compared to the previous estimates," BBVA explained. This adjustment has not effect on the group's tangible net equity, capital of liquidity. It will also not have any impact on BBVA's ability to distribute dividends.
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Sony said it expects to report a gain of JPY18 billion, about USD164.7 million, following the listing of subsidiary SRE Holdings. Real estate firm SRE, which was a consolidated subsidiary of Sony, became a publicly listed company in Tokyo on Thursday. Upon listing, Sony sold a portion of the shares it held in SRE. Sony's stake has now decreased to 44% from 56%, and SRE has become an affiliate accounted for under Sony's equity method. As a result of the listing and the sale, Sony said it expects to record around JPY18 billion as operating profit in the third quarter.
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Nestle announced on Thursday it is selling 60% of its stake in German sausage maker Herta as the Swiss food multinational moves towards healthier vegetarian products. The majority stake will go to the Spanish company Casa Tarradellas, which will co-own Herta in a joint venture with Nestle. However, Nestle said it would retain ownership of Herta's vegetarian sausage and ham products "in line with its increased focus on plant-based offerings". Herta is valued at EUR690 million.
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Friday's Shareholder Meetings
Oracle Power
European Metals
RiverFort Global Opportunities
Coro Energy (re Italian asset sale)
Accsys Technology (re share placing)
Focusrite
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By Tom Waite; thomaslwaite@alliancenews.com
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