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Report: Shell aims to sell off up to $30B in assets after profits tumble

  • Royal Dutch Shell (RDS.A, RDS.B) will start selling up to $30B of assets (£18B) next year, including a $7B stake in Woodside Petroleum (WOPEF, WOPEY), oil assets in the Niger Delta worth $2B and other assets totaling $20B, according to oil and gas analysts from JP Morgan Cazenove.
  • The disposal plan could be unveiled as early as late January and would representing ~17% of Shell’s $178B total net assets, The Telegraph reports.
  • Weak refining margins and oil theft in Nigeria caused a sharp fall in Shell's profits this year.
Comments (8)
  • wyostocks
    , contributor
    Comments (8673) | Send Message
     
    How much oil was stolen?
    Must have been tanker fulls.
    23 Dec 2013, 03:41 PM Reply Like
  • CCCB
    , contributor
    Comments (55) | Send Message
     
    I worked in Nigeria and they do steal tankers full of oil. One barge at a time an meet the tankers off shore. The blowing up of pipelines is continuous. It's so bad that they just flange the line together instead of wielding makes for a faster fix and bury them 6 ft. Most of the local government and chiefs are in on it. That is why it will not be stopped.
    This is happens to all the oil companies.
    23 Dec 2013, 05:44 PM Reply Like
  • john001
    , contributor
    Comments (799) | Send Message
     
    So management is cutting 17% of their net assets, but still planning to borrow to pay the dividends. Not a bright move. How much will be cut next year? Sort of reminds me of that Monty Python skit where an arm is severed and the reply is..."it's only a scratch".
    23 Dec 2013, 04:11 PM Reply Like
  • Rick D
    , contributor
    Comments (377) | Send Message
     
    John,

     

    Shell doesn't borrow to pay dividends. Their dividend is quite well covered by earnings. The borrowing is for capital investment. Sales of less-strategic assets help reduce this borrowing.

     

    If Shell is "severing an arm", they are growing two new ones in its place and paying for one of them using borrowed money at rock-bottom interest rates.

     

    Shell's balance sheet is rock-solid. Their plan is to keep leverage in a range of 10 - 30%, which is pretty conservative. The most recent figure I've seen has their leverage at 11%. Shell is not in any sort of financial trouble.

     

    Disclosure: Long RDS.A.
    23 Dec 2013, 05:05 PM Reply Like
  • john001
    , contributor
    Comments (799) | Send Message
     
    Rick....it is a fact that shell has borrowed to pay divs, and unless I misread a recent comment by Vosser, they will continue to borrow as necessary to pay the divs. I am also long RDS.A and have been waiting for the past 6 years for the share price to get up to what I paid for it.
    23 Dec 2013, 06:25 PM Reply Like
  • Rick D
    , contributor
    Comments (377) | Send Message
     
    Data for Q4 2012 through Q3 2013 from Shell's web site:

     

    Dividend per ADS: $3.56

     

    Basic CCS earnings per ADS: $6.96
    Payout ratio: 51.1%

     

    Basic CCS earnings per ADS excluding identified items: $7.04
    Payout ratio: 50.6%

     

    I can't speak for the distant past, but Shell didn't borrow money to pay the dividend over the past year.
    24 Dec 2013, 06:07 AM Reply Like
  • ARSAS
    , contributor
    Comments (2) | Send Message
     
    So as long term holders in this company would you buy more shares at this time or wait??? I'm looking to buy a bit of shares I need to diversify. I have a pipeline company in Canada that has doubled in price in the last year or so. PBA. TIcKer. Thank you :)
    24 Dec 2013, 06:32 AM Reply Like
  • Rick D
    , contributor
    Comments (377) | Send Message
     
    Arsas,

     

    I'd say it depends on individual circumstances. How much Shell do you already own? How much do you own in other companies in oil and gas as a percentage of your portfolio? How much spare cash do you have? What is your time frame? How much risk are you willing to tolerate? What other investments both inside and outside the energy sector have you done your due diligence on that are attractive to you?

     

    I consider Shell to be a moderate risk, moderate reward company that is somewhat undervalued. Assuming the energy picture for oil and gas remains similar to what it is today, I think Shell will increase its earnings, and presumably also its stock price, over the next 5 years or so. Of course energy is a volatile sector so that assumption may not prove to be valid.

     

    If you're asking whether you should buy Shell now or whether it will be cheaper in a few months, I have no idea. My time horizon is much longer than that. If you're concerned about the price dropping over the next few months, you can always start with a small position now and buy more if the price is more favorable in the future.

     

    The above is just my opinion. You'll need to do your own due diligence before deciding whether to initiate or add to a position in Shell. Fortunately there's quite a bit of good information out there on Shell. The articles and comments on Shell here on Seeking Alpha are as good a place as any to start.

     

    Welcome to Seeking Alpha, and I wish you the best of luck with your investments.
    25 Dec 2013, 01:11 AM Reply Like
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