Shell To Witness A Strong Quarter Backed By Rebound In Oil Prices

by Trefis Team
-47.21%
Downside
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Market
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Trefis
RDSA
Royal Dutch Shell Plc.
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Royal Dutch Shell (NYSE:RDS.A), the European integrated energy company, is slated to release its June quarter financial performance on 26th July 2018((Royal Dutch Shell To Announce June Quarter 2018 Results, 14th June 2018, www.shell.com)). The market expects the company to report a solid improvement in its quarterly as well as annual revenue driven by improved price realization for its upstream operations and higher margins for its refined and chemicals products. Further, the company’s efforts to reduce its operating costs and capital spending are likely to boost its bottom-line for the year. Going forward, Shell will continue to focus on the delivery of its new projects, which are likely to drive its value in the long term.

We have a price estimate of $67 per share for Royal Dutch Shell, which is in line with its current market price. View our interactive dashboard on Shell and modify the key drivers to visualize their impact on its valuation.

Key Trends To Watch For In 2Q’18 Results

  • Crude oil prices have seen a rebound in the first half of 2018 due to the extension of the Organization of Petroleum Exporting Countries’ (OPEC) production cuts until the end of 2018. The WTI crude oil prices averaged at around $68.06 per barrel for the June quarter, notably higher than the $48.10 per barrel of the same quarter of last year. Accordingly, we expect Shell to see higher price realization for the quarter, which will, in turn, drive its upstream revenue.
  • Apart from expanding its upstream production to leverage the improving commodity prices, Shell has been streamlining its operations by divesting the non-core and low-margin assets. During the second quarter, the company completed the sale of its 15% holding in Malaysia LNG Tiga Sdn Bhd (MLNG Tiga), 44.56% interest in Draugen, and 12% interest in Gjøa in Norway, and 22.22% interest in the Bongkot field.

  • At the beginning of 2018, Shell had announced the cancellation of its scrip dividend program and reinstated cash dividends to its shareholders. The company announced an interim dividend of $0.47 per share in the first quarter of 2018. We expect a similar dividend announcement in this quarter as well.
  • Shell had planned to restrict its annual capital investment to $25-$30 billion over the next three to four years. However, due to the faster-than-expected recovery in commodity prices, the company is likely to increase its investments at $30 billion and use the excess cash flows to accelerate its debt reduction.

Do not agree with our forecast? Create your own price forecast for Royal Dutch Shell by changing the base inputs (blue dots) on our interactive dashboard.

 

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