Royal Dutch Shell plc (ADR) (RDS.A) Declares Great Results, Faces Risks in Russia

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) announced its second quarter results today, the company performed well in the quarter, beating analyst expectations by a good margin. The company posted second-quarter earnings of $5.1 billion on a current cost of supplies (CCS) basis on, up from $2.4 billion in the same quarter a year earlier. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) also announced a second-quarter 2014 dividend of 47 cents per ordinary share.

Bloomberg’s Ryan Chilcote broke down the earnings of Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and discussed the underlying risks that the company faces in Russia.

“[…] Profits beating $6 billion, the estimate was at around $5.5 billion, profit up by 33%, that’s why the stock is up. They are pushing ahead with the restructuring program. There has been a problem in the United States, they are sorting that problem out, they took a write down of just close to $2 billion. But, Russia is an interesting one, they didn’t say anything about Russia in their statement,” Chilcote said.

Chilcote believes that companies that do business in Russia really need to think about how they approach disclosures as most of the companies have refrained from speaking much about their business in the country while reporting their earnings and even otherwise. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has assets worth $7 billion in Russia and it works closely with Russian company Gazprom in Russia’s only LNG project. Given the kind of recent sanctions that have been imposed by the U.S. and European Union on Russia for its role in Ukraine, oil companies like Royal Dutch Shell plc (ADR) (NYSE:RDS.A) can see some repercussions due to that.

“[…] If Russia goes to the oil companies that it’s working with and starts seizing their assets, logic would dictate that they wouldn’t want to do that, because they recognize that the sanctions are politically motivated and is last thing that, say ,Exxon or Shell that they work closely with, or BP, wants are these sanctions,” Chilcote added.

Disclosure: None