Royal Dutch Shell: Cautious Outlook, Nice Dividend
Kurt Wulff (McDep Associates) submits:
Buy-recommended Royal Dutch Shell (RDS.A) offers unlevered appreciation potential of 33% to a McDep Ratio of 1.0 where stock price would equal Net Present Value (NPV) of $79 a share. Fourth quarter results released today disclosed unlevered cash flow (Ebitda) below our expectations of three months ago in the upstream business as a result of higher costs recorded in the quarter. Ebitda was also lower in the downstream as the refining environment deteriorated. NPV remains supported by cash flow and reserve life in an industry context.
Cautious about the economic outlook, Chief Executive Peter Voser focuses on projects to bring on new upstream volume and on pruning the weakest refineries downstream. Further staff reductions and cost savings are expected in 2010. Because natural gas prices in long-term contracts automatically lag oil price, there are built-in gains coming in the next quarters. Albeit at continuing low levels, refining margins are expected to be better than the lowest levels in the fourth quarter.
Investing, Long Term Investment, stock market | admin March 11, 2010
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