Royal Dutch Shell: A Timely Commitment with Global Diversification

Buy-recommended Royal Dutch Shell (RDS.A) offers 30% unlevered appreciation potential to estimated Net Present Value [NPV] of $104 a share. First quarter results reported today matched our expectations for total cash flow with more from production and less from downstream than projected in our analysis three months ago.

NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P). While NPV is concentrated 52% on oil, proven reserves are concentrated 57% on natural gas by our weighted measure of oil equivalent volume. Oil has the strongest price trend currently while natural gas may have more future potential.

Lagging its peers in stock price, Royal Dutch Shell looks like a timely commitment with non-U.S. diversification and an inflation-protected dividend yield of 4.2%.

Originally published on April 29, 2008.