Shell is a vertically integrated oil and gas company (covering hydrocarbon exploration, production, refining, transportation, retail, trading etc. segments of the industry) and one of the global supermajors. In the 2019 version of the Forbes Global 2000 it was ranked as the 9th largest company in the world.
Key financials (source: IR presentation of the company)
Pros
- The company is rapidly investing into green sectors and from this perspective it is well ahead of its US peers.
- More than 7% annual dividend yield with the already announced policy to increase it.
- Large-scale share buyback programme until the end of 2020.
- Strong organic free cash flow generation, it is expected to be able to cover majority of the CAPEX.
Cons
- The expected USD 24-29 bn CAPEX pointing to the execution and consutruction risk (especially new ventures and transformational type of projects).
- The profitability of its 1.4 bn boe hydrocarbon production is largely dependent on the development of oil and gas prices and the macro environment. The company estimated its business plan for 2020 using 65 USD/bbl crude oil prices.
- Potentially increasing tensions related to climate change and emissions against oil and gas companies.
Historical share price development (in EUR, source: Yahoo Finance)
Due to the decreasing oil and gas prices, the Anglo-Dutch energy company reported decreasing 2019 full-year net profit (more than 20% compared to the 2018 figures) resulting in significant decline in its share price. In light of the above listed mid and long term advantages, such short term headwinds might represent a solid investment opportunity.
On 31 January 2020 a long position (GB00B03MLX29, RDSA) has been opened at EUR 23.84.
Link to the IR site of the company for more data and insights.
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