Shell Dives With Scaled Down Buyback Program a Key Concern
Comment of the Day

January 30 2020

Commentary by Eoin Treacy

Shell Dives With Scaled Down Buyback Program a Key Concern

This article by Filipe Pacheco for Bloomberg may be of interest to subscribers. Here is a section:

Morgan Stanley (equal-weight, PT 2,270p) says 4Q results should trigger “a negative response,” as both earnings and cash flow were lower than consensus expectations and gearing increased on a quarterly basis

Analysts Martijn Rats and Sasikanth Chilukuru say that while integrated gas was largely hit by lower trading profits, margins within chemicals appear to have been hit more than expected by the weaker macro

Oil products and upstream seen benefiting from strong marketing results and higher production volumes, respectively

RBC (sector perform, PT 2,600p) says the decision to reduce the quarterly run rate for its buyback to $1b from $2.75b into 2020 was largely factored into the stock’s recent performance and the new rate “looks well covered,”

Given gearing is 29%, analyst Biraj Borkhataria says that “Shell is right to be more cautious”

Eoin Treacy's view

Royal Dutch Shell took a big bet on natural gas and has succeeded in getting the product to market from its massive Australian offshore facility. The challenge is there is no intense competition in the LNG market as major producers vie for market share. Meanwhile Shell is also looking at lower oil prices and increasingly aggressive emissions regulations all over the world.

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