Shell has opportunity to surprise positively, says Berenberg

Oil&Gas Materials 14 January 2020 15:47 (UTC +04:00)

BAKU, Azerbaijan, Jan. 14

By Leman Zeynalova - Trend:

There is now the potential for Royal Dutch Shell to surprise positively, helped by production growth that is focused on high-margin barrels, ongoing capital discipline and a potential improvement in crude prices and refining margins, Henry Tarr, analyst at Germany-based Berenberg bank said, Trend reports citing Proactive Investors.

“Shell still faces headwinds, with weak gas and LNG prices expected to persist through 2020. The company has also flagged weak Q4 earnings," the analyst said.

Much of this is now in the price and that the company has the opportunity to surprise positively, delivering the most substantial buyback program and highest total shareholder return of the peer group, helped by an improving macro environment, according to Tarr.

He pointed out that the company has lowered the market’s expectations on both the buyback and Q4.

Berenberg believes Shell can "organically" carry out at least $8 billion of buybacks in 2020 without increasing net debt, with any divestments pulling gearing lower or enabling more buybacks.

“We model an incremental $6 billion of cash flow in 2020, driving [a free cash flow] yield of 10 percent for 2020 and the largest shareholder returns of the integrated oils.”

Production of Royal Dutch Shell is expected to be between 2,775 and 2,825 thousand barrels of oil equivalent per day in the fourth quarter of 2019, according to the company’s update to the fourth quarter 2019 outlook provided in the third quarter results announcement on October 31, 2019.

Liquefied natural gas (LNG) liquefaction volumes are expected to be between 8.8 and 9.4 million tonnes, according to Shell’s estimates.

Shell is an international energy company that aims to meet the world’s growing need for more and cleaner energy solutions in ways that are economically, environmentally and socially responsible.

Shell is a global group of energy and petrochemical companies.

Its operations are divided into our businesses: Upstream, Integrated Gas and New Energies, Downstream.


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