How Much Value Does Shell’s Upstream Operations Contribute To Its Total Equity Value?

RDSA: Royal Dutch Shell logo
Royal Dutch Shell

Like most of the integrated companies, Royal Dutch Shell (NYSE:RDSA), too, is highly sensitive to the profitability of its upstream operations. Although the upstream division accounts for less than 20% of Shell’s top line, it makes up  for almost 80% of its profits. However, the oil slump that began in mid-2014 has altered this trend to a certain extent. For instance, in 2015, Shell’s upstream operations contributed only 60% of its EBITDA as opposed to around 85% in 2014. Thus, the integrated company’s upstream operations have been creating a dent in its bottom-line as well as overall value.

However, over the long-term, the commodity prices are likely to rebound. This will reverse the current anomaly and reinstate the importance of upstream operations in Shell’s valuation. Hence, in this note, we aim to determine how much value these upstream operations will add to Shell’s equity value over the next five years.


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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Royal Dutch Shell

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