at CNBC.com (Wed, 11:40AM)
at MarketWatch.com (Wed, 4:03AM)
at MarketWatch.com (Tue, 12:23PM)
at CNBC.com (Tue, 11:30AM)
at CNBC.com (Tue, 6:27AM)
at CNBC.com (Mon, 6:39PM)
at CNBC.com (Mon, 5:46PM)
at CNBC.com (Fri, 8:52AM)
at CNBC.com (Fri, 7:34AM)
at CNBC.com (Thu, 4:22PM)
3 Reasons To Buy Royal Dutch Shell, Despite Lower Oil Prices
- Oil prices fell to new five-year lows last week.
- Royal Dutch Shell's stock price tumbled 25% over the past months.
- In this article, I identify three reasons to buy Royal Dutch Shell despite the lower oil prices.
- In a past article, I outlined the idea of “dividend hors d’oeuvres.”.
- This article looks at Royal Dutch Shell, which has roughly the same stock price today as it did years ago.
- Despite this fact, this alone did not preclude an investor from achieving reasonable returns.
- Shell delivers another quarterly beat.
- The improved earnings combined with strong free cash flow generation provide further confidence that underlying portfolio is improving.
- Shell is focused on controlling capex and costs in a weak price environment, as well as the strength of the company’s balance sheet to weather any short-term squeeze.
Royal Dutch Shell Looks Promising On Expectations Of Continued Growth
- Despite being one of the largest companies in the industry, Shell is still attractive.
- Strong 2Q2014 results likely to replicated in 3Q2014.
- Positive trends in free cash flow and dividends will continue to reward investors.
Royal Dutch Shell: Patience Is Paying Big Dividends
- Over the past year, integrated major Royal Dutch Shell sold off billions of assets as part of a large divestment program.
- Royal Dutch Shell kept the focus on fewer, more critical projects. As a result, this capital discipline has increased efficiency and returns.
- Royal Dutch Shell used the proceeds from its divestments to increase cash returns, accomplished through dividend growth.
- The end result is that growth has resumed, making Royal Dutch Shell's modest valuation and compelling dividend both very attractive.
- Oil and gas from Cardamom will contribute massively to Shell’s production by producing 50,000 barrels daily. Shell would be piping oil and gas from this field to Auger platform.
- The company announced its second-quarter results for 2014 and reported earnings of $5.1 billion compared to the earnings of $2.4 billion generated in the prior year’s second quarter.
- Though the stock is likely to perform in line with the U.S. market for the next one to three months, its future gains should be higher.
- Shell is in the middle of consolidating and divesting from less promising or unprofitable projects..
- New emphasis seems to be on the pursuit of value added through downstream projects. Company has been in the midst of probing and exploring potential opportunities..
- With little chance of Shell being able to increase upstream production given the overall downward trend faced by global oil & gas majors, pursuit of downstream good idea..
- Shell Plc has decided to sell four oil fields and a pipeline that would garner around $5 billion for the company.
- Oil theft witnessed in the country that happens to be Africa’s largest crude producer, is worth more than a billion dollars.
- Shell’s aim is to focus on lucrative assets that it is hunting down on a global scale, with the company set to offload $15 billion worth of existing assets.
- It needs to substitute the lost reserves with new ones at significantly lower cost.
- Shell’s ability to drive significant underlying improvement is why I think there is room for further re-rating;
- While the new CEO has put Shell back on track, there is a lot more to do;
- With the ability cover both capex and dividends with CFO, Shell is already in a position its peers would love to be in.
Shell: The European Outperformer With More To Come
- Only a year ago Shell was one of investors' least favorite stocks in the European oil sector.
- Much has change in the last one year and Shell is in much better shape now. Particularly in 2014, Shell delivered significantly improved earnings and cash flow growth.
- At a time of long-term visibility on low interest rates, I find Shell’s 4.7% dividend yield and 2%+ dividend growth an attractive investment proposition.
- Rumor has it that Shell is close to selling its stake in Nigerian onshore oil fields.
- Together with other divestments, it seems that Shell almost completed its divestment program.
- In this article, I discuss what is next after Shell completes its divestment program.
- My free cash flow forecasts and consensus long-term EPS growth estimate suggest that RDS may have capacity to boost dividend growth in next few years.
- Current valuation only reflects 4.0%-4.5% dividend growth rate, which is in line with its recent historical level.
- RDS trades at discount valuation relative to peers despite its above-average earnings growth potential and dividend yield.
Royal Dutch Shell Looks Even More Appealing After The Woodside Divestment
- Shell divests 18.6% of its stake in Woodside Petroleum for $5.7 billion.
- Shell already completed $11 billion of its $15 billion divestment program.
- Shell executes its new strategy to divests non-core assets faster than expected.
- Underlying profit should recover faster than expected as well.
How To Get $1,000 Annual Dividends From Royal Dutch Shell In 2024
- For income investors that like to build positions of stocks paying out $1,000 in annual dividends, you can achieve this with Royal Dutch Shell by purchasing 89 shares today.
- The key assumption is that you reinvest dividends for ten years and achieve a long-term dividend growth rate of 6%.
- Despite recent problems with natural gas in North America, Shell seems poised to grow cash flow per share by 6-7% in the near-term future, paving the way for dividend hikes.
- Shell reshaped its dividend payment plan, so we reassessed its place in our portfolio.
- The company offers an attractive dividend but appears overvalued.
- After taking a closer look at Shell, we sold most shares and bought other companies.
- We still have some decisions to make regarding our last batch of Shell.
- Shell is scrapping its Scrip Dividend Programme, causing tax headaches for some shareholders.
- When the change takes effect, there will be little reason to hold RDS.A.
- Those who still want to own Shell beyond this summer should sell A shares and buy RDS.B.
- Management's updated strategy plan will improve free cash flow profile.
- 7%+ annual dividend growth and cumulative $7.5B share buyback through 2016 is achievable.
- Current share price only reflects 4-5% dividend growth potential.
- Valuation gap to global oil majors should shrink if capital return can be improved.
Mon, Dec. 22, 3:23 PM
- S&P revises its outlook to negative for BP, Royal Dutch Shell (RDS.A, RDS.B) and Total (NYSE:TOT), as it cites “the dramatic deterioration in the oil price outlook” in forecasting still more negative free cash flow in 2015 extending possibly into 2016, given fairly inflexible capital expenditure and high dividends.
- S&P says debt and dividends for Europe's oil majors have increased 50%, leaving them less flexibility in dealing with a cash crunch; BP has an indicated dividend yield of 6.85%, followed by 5.7% for TOT and 5.25% for Shell.
- S&P also says it may cut the ratings on Eni (NYSE:E) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY).
Sat, Dec. 20, 1:29 PM
- The super majors are probably the first place to look when oil prices fall, writes Avi Salzman, as their stocks tend to slide less drastically than smaller players, and maintenance of dividends is a priority for management. Favorites: Shell (RDS.A, RDS.B) and Chevron (NYSE:CVX).
- While smaller producers appear risky, Occidental (NYSE:OXY) came into the price plunge well-positioned with one of the industry's cleanest balance sheets.
- EOG Resources (NYSE:EOG) could be the pick among shale drillers, says Salzman, as it's chosen drilling spots carefully and its break-even price is among the lowest in the industry. "[The] best management team in Houston," says one fund manager.
- Oil service stocks look especially vulnerable with capex budgets being cut, but Schlumberger (NYSE:SLB) "should have protection in the downturn," writes Salzman, noting the company repurchased 1% of the float in Q3 and at 1.8% yields more than (soon to-be-merged) Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).
- See also: Barron's: Five oils to be wary of (Dec. 20, 2014)
Thu, Dec. 18, 6:41 PM
- Royal Dutch Shell (RDS.A, RDS.B) is expected to announce by March if it will go forward with plans to drill for oil in Arctic waters offshore Alaska in 2015, a decision which may have more to do with the outcome of court cases and U.S. government reviews than global market fundamentals, sources tell Platts.
- But Shell's decision is widely seen as a potential turning point for the company's long-range Arctic plans, with billions already spent and rival companies putting their own Arctic drilling plans on hold; if Shell does not pursue drilling off north Alaska in 2015, it may abandon the region indefinitely.
- Shell officials have given no indication of their intentions, but ConocoPhillips and Statoil have both put an indefinite hold on their own Arctic drilling plans, and Chevron said this week that it also was indefinitely suspending its Arctic drilling plans.
Thu, Dec. 18, 10:46 AM
- Royal Dutch Shell (RDS.A, RDS.B) says it has resumed production of Nigerian EA crude oil and lifted its force majeure on the grade after completing repairs to a mooring platform damaged by weather in June 12.
- Also, Shell is selling its retail, commercial fuels and supply and distribution logistics businesses in Norway to ST1 for an undisclosed sum; the move follows sales of refineries in the U.K., Germany, France, Norway and the Czech Republic, as well as downstream businesses in Australia and Italy.
Wed, Dec. 17, 2:20 PM
- New York Gov. Cuomo's administration says it will ban fracking statewide, citing health concerns and what it considers as limited economic benefits to drilling.
- NY's acting health commissioner said at a cabinet meeting in Albany today that studies on fracking’s effects on water, air and soil are inconsistent, incomplete and raise too many “red flags” for the state to allow it; the state Department of Environmental Conservation will now issue a legally-binding recommendation prohibiting fracking.
- The state has had a de facto moratorium on fracking for more than six years, so nothing really changes with today's decision.
- Parts of New York sit atop the gas-rich Marcellus shale formation, whose top producers include CHK, RRC, RDS.A, RDS.B, TLM, APC, ATLS, COG, CVX, CNX, EQT, EOG, XOM, WPX, XCO, CRZO, SWN, AR.
Mon, Dec. 15, 10:57 AM
- Chevron (CVX +0.2%) plans to withdraw from a $10B shale gas deal with Ukraine, according to a senior Ukrainian presidential official, with local media citing a recent tax increase on energy companies as prompting the move.
- Ukraine signed a shale gas production-sharing agreement with CVX in late 2013, just months before mass protests in Kiev ousted former president Yanukovich and plunged the country into its current crisis with Russia.
- CVX's deal to develop the Olesska field in western Ukraine followed a similar shale gas agreement with Royal Dutch Shell (RDS.A, RDS.B), whose deal also could be under threat as the gas deposit intended for development is close to the eastern territories now controlled by pro-Russian separatists.
Fri, Dec. 12, 11:55 AM
- The timing couldn't be worse for Mexico in lifting its 75 years of state monopoly in oil production, as plunging oil prices dim the chances that U.S. producers will move in with their fracking and horizontal drilling capabilities.
- Mexican offshore assets have drawn interest from oil majors from Exxon (NYSE:XOM) to Shell (RDS.A, RDS.B), but the question is how quickly producers will be willing to move into the higher-risk, more costly prospects in an environment of reduced investment budgets.
- Mexico’s oil regulator this week approved preliminary rules for the first round of bidding on 14 shallow-water oil blocks in July, two months behind the original timetable; the deputy energy minister said bidding terms may be changed for the Chicontepec formation, which holds more than 17B boe.
Thu, Dec. 11, 10:45 AM
- Investors in giant gas export terminals from Australia to Canada are facing the prospect of losing nearly $250B plowed into the projects during the past seven years, as weaker oil prices threaten to wipe out returns.
- Oil-linked pricing means LNG producers stand to get much less revenue than expected on delivery of their first shipments, and oil prices have fallen so low that U.S. shale gas producers with plans to export the usually cheaper fuel to Asia suddenly find themselves facing a much tougher competitive environment.
- LNG prices in Asia have sunk below $10/MMBtu, while most Australian LNG projects would need to sell the commodity for at least $12-$14 to break even; for example, the breakeven point for the $54B Gorgon project under construction by Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (RDS.A, RDS.B), is ~$17.7/MMBtu.
- Other relevant tickers: LNG, TOT, COP, CEO, FCG, GASL, OTCPK:BRGXF, OTCQX:BRGYY, OTCPK:STOSF
Thu, Dec. 11, 9:17 AM
- The Turkish government says it will partner with Royal Dutch Shell (RDS.A, RDS.B) to explore for natural gas and oil in the western Black Sea after discoveries were made in the Romanian basin.
- Turkey will have a 50% interest with Shell on the $300M investment, which is planned to begin in January.
- Also, Turkey's energy minister says the country could propose to Russia building an LNG terminal in an energy complex on its border with Greece, as talks on a planned new gas pipeline continue.
Thu, Dec. 11, 7:47 AM
- Royal Dutch Shell (RDS.A, RDS.B) has started a sale process for its 75% stake in the Tongyi oil lubricants joint venture, with bids as high as $500M expected, Dow Jones reports.
- A deal could be particularly interesting to prospective buyers because it is a rare opportunity for a slice of China's energy industry where foreigners can own controlling stakes.
- Shell's management has been looking to raise cash and slim down to boost returns as falling oil prices pressure results.
Tue, Dec. 9, 8:12 AM
- Jefferies downgrades oil service stocks Schlumberger (NYSE:SLB), Oceaneering (NYSE:OII) and Nabors Industries (NYSE:NBR) as it lowers its Brent oil price forecast for 2015 to $72/bbl from $90, as well as an average 16% for 2015, 2016 and 2017.
- The firm expects oil prices to remain under pressure from temporary oversupply and sluggish global economic growth through H1 of next year, and remains concerned about longer-term deepwater development in light of oil prices vs. cost structures.
- Jefferies views Royal Dutch Shell (RDS.A, RDS.B) as the most defensive oil stocks in an environment where overall integrated oil earnings will drop 30% in 2015 and 21% in 2016.
Mon, Dec. 8, 4:59 PM
- Noble Corp. (NYSE:NE) says it reached a $12.2M settlement with the U.S. Justice Department related to safety violations on a rig used in Arctic waters off Alaska in 2012.
- The Noble Discoverer was contracted by Royal Dutch Shell (RDS.A, RDS.B) to work on Shell leases in the remote Chukchi Sea off northwestern Alaska.
- The deal is fodder for environmentalists who oppose Arctic drilling, even as Shell seeks to persuade regulators it is ready to resume work in the area next summer.
Mon, Dec. 8, 12:59 PM
- BP (BP -2.3%) is set to cut jobs as part of its latest restructuring efforts, and others are likely to follow suit with Brent now down ~40% since June.
- The ranks employed in the upstream operations of oil and gas companies have continued to rise in recent years, even as production has flatlined or started to fall; at BP, the number of upstream employees rose 17% during 2010-13, and the company's production per upstream employee was nearly a third lower in 2013 than in 2010.
- It is a similar story at other European energy firms: Upstream head count at Total (TOT -2.2%) rose 6% over the same period even as production per head dropped 17%, and Shell (RDS.A -2.6%) reported higher staff numbers after an accounting change while production per member of upstream staff has dropped nearly 20%.
Fri, Dec. 5, 5:57 PM
- Mexico's government likely will delay or scale back tenders for some of the oil fields and areas that it planned to offer in the coming months, especially in areas with shale oil where recovery costs are higher than in traditional oil fields, the country's energy minister says.
- Auctions for deepwater fields were not likely to change because they were longer-term investments, but other fields with non-conventional oil, shale gas and shale oil probably would be delayed or reduced in scope.
- In addition to low oil prices, Mexico’s regulators have been struggling with putting together a large bid round in a short period of time with vast new responsibilities and limited staff, analysts say.
- Chevron (NYSE:CVX) and Shell (RDS.A, RDS.B) are among oil majors that have expressed keen interest in getting involved in Mexico.
Fri, Dec. 5, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, APC, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, COP, XOM, FST, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Fri, Dec. 5, 10:19 AM
- The recent history of oil price collapses shows that M&A activity typically jumps when prices fall, so WSJ says it may be time for another wave of acquisitions to sweep through the energy sector as crude oil prices have been cut by more than a third since June.
- BP jumped by nearly 5% Tuesday on chatter that Royal Dutch Shell (RDS.A, RDS.B) was going to make a bid - the rumor was not new, but it took on a new credibility in the new low price oil environment.
- The WSJ report says several bankers believe BG Group (OTCPK:BRGXF, OTCQX:BRGYY) could be a target for a big company looking to get bigger.
- Oppenheimer analyst Fadel Gheit points out that big deals may be harder now than in the past because there are simply fewer large companies left.
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