Royal Dutch Shell Shows Record Results

Record cash flow and earnings for the first quarter 2007 reported on May 3 support our estimate of Net Present Value [NPV] of $84 a share for buy-recommended Royal Dutch Shell plc (RDS.A).

More than its mega cap peers, RDS is concentrated about 36% by value on downstream including oil products, chemicals, gas and power. The source of latest gains, downstream may have higher profits ahead.

While oil’s share of NPV at 47% is almost three times natural gas at 17%, oil’s share of weighted proven reserves of 4.2 billion barrels is less than natural gas at 5.4 billion barrels equivalent. The commodity price for both oil and natural gas is in an uptrend with quotes for delivery over the next six-years above the 40-week average.

We think that continued strong performance justifies a full weighting for RDS stock in our illustrative energy portfolio concentrated on real assets that promise a high return providing clean energy for global growth.

Originally published on May 3, 2007.

RDS.A 1-yr chart: