With Oil Prices Poised To Trend Higher In 2020, Can Royal Dutch Shell’s Revenue Recover?

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Royal Dutch Shell Plc.
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Royal Dutch Shell (NYSE: RDS.A) is a multinational oil major based out of The Hague, Netherlands. It employs over 82,000 people and competes with a range of other oil majors including Exxon Mobil, British Petroleum and Chevron. Royal Dutch Shell’s revenues have been under pressure in 2019 due to the decline in oil prices. However, as detailed in our interactive dashboard, we expect Shell’s top line to increase by 3% for 2020 after having shrunk by roughly the same amount over 2019.

 

A Quick Overview of Royal Dutch Shell’s Revenues

Shell’s 3 operating divisions should have generated just over $350 billion in revenues for full-year 2019:

  • Upstream: The Upstream division consists of; exploring and producing, crude and natural gas. This division would have contributed 15% of the total revenue. ($52.6 billion)
  • Downstream: The Downstream division consists of; retail and marketing of refined products, refined crude products, and chemical products.  This division is expected to have contributed 83% of the total revenue. ($277 billion)
  • Integrated Gas: The Integrated Gas division is responsible for producing and distributing, LNG products. The division very likely contributed 6% of the total revenue. ($20.7 billion)

Royal Dutch Shell To Continue To Increase Crude Output As Brent Nears $70:

  • Brent crude price, which had been hovering around $65 dollars to the barrel in the third quarter of FY19, was affecting the company’s crude output. But with the price of crude moving up in Q4 2019, channel checks show that the company’s crude output may have recently increased by 3-4%.
  • Should Brent continue to recover towards $70 a barrel, we expect the output to increase an additional 3-4% over 2020.
  • Therefore, oil prices remain key to Royal Dutch Shell’s fortunes.
  • Revenue from the Upstream division is largely a factor of the company’s crude revenue, with the natural gas division continuing to struggle due to a glut.
  • We expect to see an 11.7% increase in revenue from the division over 2020.

The Integrated Gas division may see a recovery, as a colder winter draws-down LNG

  • The Integrated Gas division, which is weather dependent, may recover on a colder-than-expected winter in Europe. A colder winter will in all likelihood drive both revenue and margins in early 2020.
  • Recent expansion of some LNG plants in Africa may provide further impetus to margins even as all the company shutters some plants in Australia.

 

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