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.
Have more questions about Royal Dutch Shell (NYSE:RDSA)? See the links below:
- How Will Shell’s Upstream Production Change In The Next Five Years?
- Here’s Why We Think Shell’s Stock Price Is Worth $53 Per Share
- Shell’s 2Q’16 Earnings Expected To Suffer As Commodity Prices Remain Depressed
- What Is Shell’s Strategy To Combat The Commodity Downturn Over The Next Two Years?
- How Will Shell’s Revenue Be Impacted If Crude Oil Prices Average At $50 Per Barrel Till 2018?
- How Will Shell’s Revenue Move If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- Why Are Shell’s Upstream Operations More Important Than Its Downstream Operations?
- How Much Value Will The BG Group Acquisition Add To Royal Dutch Shell?
- By What Percentage Can Royal Dutch Shell’s Revenues Grow Over the Next Five Years?
- What’s Royal Dutch Shell’s Revenue & Earnings Breakdown In Terms of Different Products?
- What’s Royal Dutch Shell’s Fundamental Value Based On Expected 2016 Results?
- How Is Royal Dutch Shell’s Revenue & EBITDA Composition Expected To Change in 2016?
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 firstname.lastname@example.org
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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