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Analysis Shell (RDS) update May 4th, 2021 

Not updated since 2021 !

The following article is is not a recommendation or proposal to do anything. The data written in this article is not guarranteed. It is my private personal opinion. I`m not independing as I own a position of RDS shares. 

Royal Dutch Shell is a global integrated and one of the biggest oil & gas companies of the world with an average production of 3 1/2 mio. barrels of oil equivalent per day generating revenues in 2020 of 183 bn$/yr.  

Shell is a company with a glorious past. Till shortly ago the big highlight was a dividend of 47c/share each quarter. It was slashed to 16c/share and is now increased to 17.35c/share. A big benefit is that the RDS B share is noticed on the LSE. There is no withholding tax applied in the UK. Hence you`ll get the full dividend paid on your account. The RDS A share is noticed in the Netherlands. It is less expensive as withholding tax is deducted. 


RDS is a company with a glorious past, great assets and a weak management.

RDS got from its past a lot of cash machines but sacrificed its future for a steady dividend and invested not enough to compensate for the depletion of its reserves and downstream assets. The reserves cover now only 7 years of production compared to 9.5 in 2016. That means the business is going to shrink in the future. They spent a lot on dirty windmills but this business does not generate a positive cash flow till today.

The management kept the dividend stable for years while the cash flow was fluctuating with the fluctuating business field. Thus it axed capex and sold profitable assets.

On government and NGO pressure it committed to stop production in the Groningen gas field (the biggest in Europe and a big cash cow) by 2030 without compensation.

The management calls RDS a "climate change aware oil company" which is a contradiction in itself. I assume that the RDS managment was pressed by institutional investors (investing other poeples money) to this step. The managers of such investors does not act as a person acc. to the messages of this religious believe but does it on cost of their clients. Royal Dutch Shell has proposed linking its directors’ pay more closely to the group’s climate performance (30). That means the management is rewarded for destroying the company!

RDS is a gigantic company with structures, organization and know how optimized to handle multi billion $ multi decade projects. "Renewable energies" depend completly on regulation & subsidy schemes of local and national politicians that change regularly according to elections and other political events. From my point of view smaller more flexible companies with close ties to politics are by far better suited to work in this field than the giants as RDS.

The biggest opportunity for RDS is to slash dividend, slash capex for green nonsense and buy excellent assets to replace the dwindling reserves.  

A new hungry management team would be a great opportunity for RDS. 

Risks & Chances

There was already before the corona panic ble-up an overcapacity in oil production. The major players are the OPEC with KSA on top and Russia. As they disagreed with each other they flooded the market and the oil price collapsed already before the big covid panic started outside China. 
The corona panic let the world economy collapse. Oil consumption was reduced by about 30% in April 2020 vs. 2019. The major oil producing countries cut their production to get supply in balance with demand. In the meantime it is going to recover. That means there are significant free capacities in the market that prevent any upturn but bear the risk of a downturn anytime depending the ability of the OPEC + Russia to control the market. Asian countries try to come back to a normal business life. 

The constant dividend of RDS was a sword with two sides. RDS felt committed not to lower the dividend and it did not do it since WWII. This gives reliability to retired shareholders but on the other hand it is a burden during oil&gas downturns. During the period of low oil prices 2015 - 2016 the dividend ate up more than the free cash flow increased depth, increased the number of shares by a script dividend option and kept RDS from taking opportunities as buying assets for low prices beside BG. Thus the decision to slash dividend by 2/3 was the right decision. 

Integrated gas means gas production, terminals, liquidification and regassing plants... On my point of view LNG is an opportunity for the future. I assume that LNG might become a major energy source to power ships, engines, vehicles and homes not connected to the gas grid. As nearly all major oil companies invest in LNG it seems supply will outgrow demand and thus its profitability is in question. 

An opportunity for RDS in the long run is the downstream and the chemical sector. There is less politics (arbitrary decisions, nationalizations, sanctions) in the downstream sector than in upstream ex. Nigeria (4). Margins in the chemical and downstream sector are in average (fluctuations) quite well if the location of the plants is chosen well. The downstream and chemical sector is more stable than the upstream sector. 

Reseve Performance


RDS is split in 5 divisions Integrated Gas, Upstream, Oil Products, Chemicals and Corporate. 

RDS management plans to increase its investments in favor of dirty  "renewable energies" as wind & solar to 1/4 of its capex. Renewable energies as solar & wind generate electricity according to the coincidences of the weather, daytime & season. The value of this electricity is close to 0. The revenues are generated by subsidies and regulation. Beside of the moral question to cheat the poeple the margins are by far lower than that of the oil&gas business. The political risk from elections and governmental changes are high. 

RDS sold its Venzuela assets (2). RDS kept the assepts thru years of socialist ruling and suffered a lot. No investor will actually pay a good price for it. In the meantime it looks very much as if the socialist ruling comes to a collapse most probably sooner than later. A clever management would try to keep a foot in the door of the worlds largest oil reserves to be in a good starting position when the socialist ruling comes to an end.



A main play of RDS is the LNG market. Global demand for liquefied natural gas rose sharply 11% in 2019 to 354M metric tons after climbing 9% in 2018 as new facilities increased supplies to Europe and Asia, Royal Dutch Shell says(12). Most analyst assume that the demand for LNG is outgrowing the supply in a few years. The analysts believe that a large share of this additional demand comes from China and India.

On my point of view China is getting more and more in a rivalty with the USA. The USA is a major producer and potential exporter of LNG. Thus I do not think that China will increase its LNG import as much as analysts believe. I rather think they will support the deveolpment of domestic gas resources, promote the use of electicity (coal, nuclear) for heating similar to France and South Korea...coal for industrial heat... India has plenty of poor poeple that needs the least expensive energy.

Due to the corona panic and the economic crises created the Asian countries will not focus that much on pollution and not at all at the climate hoax. Thus they will rather promote coal. Potentially the demand will grow far slower than predicted if at all. Actually it looks like production outgrows demand and producer have to cut their production as in the oil market. .  

RDS biggest LNG project is the western Canada LNG export terminal. A LNG terminal is a main issue for the promotors of the climate hoax. The canadian government is political very green minded. Thats why the RDS LNG project and the pipeline from Alberta to feed it might face a  political risk difficult to evaluate (9). RDS might be best advised to put this project on hold.   

Some Data


Share              Issue                    Float                   Treasury

RDSA             4,105,643,625          4,101,239,499         0       

RDSB            3,713,984,248        3,706,183,836          0

Total                                           7,807,423,335      Dec. 31, 2020 


Ownership RDS A (market screener (16)):  

Name                                                                                                         %

Nederlands Centraal Instituut Voor Giraal Effectenverkeer BV                        40.1%

BlackRock Investment Management (UK) Ltd.                                              4.78%

The Vanguard Group, Inc.                                                                          3.32%

Franklin Advisers, Inc.                                                                               2.99%

Legal & General Investment Management Ltd.                                              2.81%

Norges Bank Investment Management                                                         2.57%

State Street Global Advisors Ltd.                                                                 2.43%


BlackRock Fund Advisors                                                                             2.40%

Ownership RDS B

Name                                                                                                       %

Capital Research & Management Co. (Global Investors)                              8.05%

BlackRock Investment Management (UK) Ltd.                                            3.78%

The Vanguard Group, Inc.                                                                        3.17%

Qatar Holding LLC                                                                                   2.34%

Legal & General Investment Management Ltd.                                           2.15%

Norges Bank Investment Management                                                      2.04%

Capital Research & Management Co. (World Investors)                               1.82%

State Street Global Advisors Ltd.                                                              1.82%


Name                                                       Equities               %            Valuation

Shell Midstream Partners LP (SHLX)           99,979,548          44.7%    1,640,664,383 USD

Pilipinas Shell Petroleum Corp (SHLPH)      890,860,233        55.2%    808,945,635 USD

Viva Energy Reit Ltd (VVR)                       276,060,625        38.0%    437,280,030 USD

Hankook Shell Oil Co., Ltd (002960)           700,000              53.8%    211,104,138 USD

Showa Shell Sekiyu K.K.                           14,284,000          3.83%    199,344,790 USD

Shell Pakistan Limited (SHEL)                    81,443,702          76.1%    179,903,437 USD

Shell Oman Marketing Company SAOG      43,800,000          46.1%    168,942,732 USD

Some News

Feb 09,2021 RDS is going to take a "hard look" on its Nigeria Onshore assets. 

The onshore assets in Nigeria (including shallow water production) are run by SPDC (Shell Petroleum Development Company), where RDS has a 30% stake. In 2020, SPDC produced 156k boe/d (42% oil), down 11% from the year before. Assuming no additional investment in the region, I assume a 5% per year average production decline through 2038, when the onshore leases expire. 

Van Beurden's comments apply to Shell's onshore oil & gas assets only, as theft and sabotage are less of an issue offshore.  RDS does not break down its profits by region, but it is reasonable to assume operating costs below the company average after Shell reallocated capital from other regions to Nigeria during the downturn citing lower costs. I back-tested my model based on the disclosed $392M of income taxes SPDC paid in 2019. The same report shows no infrastructure improvement spending in Nigeria, thus I assume that maintenance spending is included in operating costs. Overall, I estimate the value of Shell's onshore oil & gas assets at ~$2.30/share, or 6% of its share price. (29)

May 05, 2020 RDS sold the Pennsylvania Marcellus asset for $541 million that it bought it for $4.7 billion dollars in 2020. It is the result of a wrong estimation of future gas prices. RDS did not earn money with this asset. (28)

2019/09/10 A comment written on the claim that the Dutch Government plans to close Groningen in 2022 ...

Groningen produces 25 bn m3 gas annually. That means 3.8 bn € (4 bn $) revenues annually. The operating costs of a 65 year old field with written off equipment is low. That means it generates a cash flow of perhaps 2bn € annually. 

The region of Groningen is the most sparsely populated area of the Netherlands. If there are some damages to housing and public properties  lets say 5000/year 50000 € each it is a damage of 250 million € that can be paid easily from the cash flow. 
If the government closes the field I hope that RDS does not buckle to the government as they did in the past but stands up and fight for compensation.  


2019/08 RDS intends to buy ERM Power. It is one of the largest commercial and industrial electricity retailers in Australia. ERM operates a gas fired power plant (24)

2019/06 RDS sells ist Martinez refinery, in central California near San Francisco, to PBF Energy Inc. For USD1 billion. The Martinez refinery has a capacity of 157,000 barrels per day, producing gasoline, diesel, and jet fuel, amongst other products. 

The West Coast refining market had very good margins in the past. It provides a constant cash flow and thus the decision is not easy to understand.  

2019/05 The Quest CCS facility captures and stores about one third Alberta, (4 mio. tons) of the CO2 emissions from the Shell operated Scotford Upgrader near Fort Saskatchewan, ,which turns oil sands bitumen into synthetic crude that can be refined into fuel and other products. The CO2 is transported through a 65km pipeline and injected more than two km underground below multiple layers of impermeable rock formations. The question is who pays for this green nonsense! (17)

RDS is going to develop a new shale oil field in Argentina..that is planned to produce of 70K boe/day by 2025 (8)

Some Comments: 

2019 Sept. 12th The author seems to me more a green believer than an independent thinker. "Renewable Energies" does not exist in natural science. The name is perhaps chosen to show that these "energies" are bejond the limitations of technologies and economics. The electricity of dirty wind & solar power plants is generated acc. to the coincidences of weather daytime & season. In a grid where demand and generation needs to be in balance at any moment its value is about 0. The revenues from wind & solar depends completly on regulations and subsidies and at the end on the erratics of politics. Some left wing politicians create regulations and subsidies other more right wing politicians slash them sometimes even with backwardation. As there are many government controlled companies in the field the profit margins are lower than that of oil, gas and downstream. 

I would rather suggest that RDS should use its core competences in realizing huge long term projects in the field of gas & oil & downstream ideally in countries with stable legislation. Off shore gas fields in Australia, deep sea oil in Brazil, basic chemicals in countries with low feed stock costs. I`m very shure that there is as well in 30 years someone willing to pay for LNG, Diesel and Polypropylen. 

To Main Page




(30) 2021/03/29 https://www.reuters.com/article/climate-change-shell-pay/shell-to-link-executive-pay-more-closely-to-groups-climate-performance-idUSL8N2LR2AY

(29) 2021/02/09 https://seekingalpha.com/article/4404416-shells-hard-look-nigeria-all-bark-no-bite?mail_subject=rds-a-rds-b-shell-s-hard-look-at-nigeria-all-bark-no-bite&utm_campaign=rta-stock-article&utm_content=link-0&utm_medium=email&utm_source=seeking_alpha

(28) 2020/05/05 https://seekingalpha.com/article/4343083-shell-exits-marcellus-shale-losing-4_1-billion-and-raising-questions?utm_medium=email&utm_source=seeking_alpha&mail_subject=rds-a-rds-b-shell-exits-the-marcellus-shale-losing-4-1-billion-and-raising-questions&utm_campaign=rta-stock-article&utm_content=link-0

(27) 2020/02/29 https://www.globenewswire.com/news-release/2020/02/28/1992861/0/en/Voting-Rights-and-Capital.html

(26) 2020/01/30 https://www.shell.com/investors/financial-reporting/quarterly-results/2019/q4-2019/_jcr_content/par/textimage_400875472.stream/1580396499592/8294dc96775e366a37b19ea982d9ff74a271e7b2/q4-2019-results-webcast-presentation-slides.pdf

(25) 2019/09/30 https://seekingalpha.com/news/3502635-shell-reports-q3-drop-upstream-production-lng-output-jumps

(24) 2019/08/27 https://www.nsenergybusiness.com/news/shell-energy-acquire-erm-power/

(23) 2019/08/04 https://www.shell.com/investors/financial-reporting/quarterly-results/2019/q2-2019/_jcr_content/par/toptasks_1119141760.stream/1564583782680/1a956d59dd376c7622d6060b182602c001c8c405/q2-2019-qra-document.pdf

(22) 2019/08/04 Effecten Spiegel 18.07.19 S3

(21) 2019/06/21 https://seekingalpha.com/news/3473007-big-u-k-investor-dumps-exxon-climate-change?dr=1#email_link

(20) 2019/06/13 https://seekingalpha.com/news/3471071-conocophillips-hess-cut-norway-wealth-fund

(19) 2019/06/12 https://www.lse.co.uk/AllNews.asp?code=l8xt7ys1

(18) 2019/06/04 https://seekingalpha.com/news/3468783-shell-sees-dividend-spending-boost-2020

(17) 2019/05/25 https://www.hydrocarbonengineering.com/the-environment/24052019/shells-quest-css-facility-reaches-co2-capture-milestone/

(16) 2019/05/22 https://www.marketscreener.com/ROYAL-DUTCH-SHELL-6273/company/

(15) 2019/05/02 https://seekingalpha.com/pr/17496544-royal-dutch-shell-plc-1st-quarter-2019-unaudited-results

(14) 2019/03/14 https://seekingalpha.com/article/4248616-will-royal-dutch-shell-raise-dividend?app=1&dr=1#alt2

(13) 2019/03/05 https://www.world-nuclear-news.org/Articles/Japan-LNG-imports-fall-as-nuclear-plants-restart

(12) 2019/02/24 https://seekingalpha.com/news/3436622-global-lng-trade-climb-11-percent-2019-shell-says-new-report?app=1

(11) 2019/02/15 https://www.londonstockexchange.com/exchange/news/alliance-news/detail/1550220939864467200.html

(10) 2019/01/31  https://seekingalpha.com/article/4237009-royal-dutch-shell-plc-2018-q4-results-earnings-call-slides?app=1&dr=1

(9) 07/01/2019 https://seekingalpha.com/article/4231726-shell-kitimat-lng-trouble-ahead?app=1&dr=1

(8) 18/12/28 https://seekingalpha.com/news/3419486-shell-start-major-project-argentinas-vaca-muerta-shale-play-next-year?app=1&dr=1#email_link

(7) 18/12/26 https://www.theguardian.com/business/2018/dec/26/shell-says-it-wants-to-double-green-energy-investment

(6) 18/12/19 https://www.pv-magazine.com/2018/12/19/shell-acquires-49-stake-in-singapores-cleantech-solar/

(5) 18/12/17 https://seekingalpha.com/article/4228793-shell-shareholders-expect-dividend-raise?app=1&dr=1

(4) 18/12/13 https://seekingalpha.com/news/3416820-shell-eni-face-1_1b-lawsuit-2011-nigerian-oil-deal?app=1

(3) 18/11/01 https://seekingalpha.com/article/4217047-royal-dutch-shell-plc-2018-q3-results-earnings-call-slides?app=1&dr=1

(2) 18/10/13 https://seekingalpha.com/news/3397017-reuters-shell-seeks-sell-venezuela-jv-stake-frances-maurel-and-prom?ifp=0&v=1539344700

(1)18/10/02 https://seekingalpha.com/article/4209358-assessing-shells-potential-returns-higher-oil-prices?app=1&dr=1

18/10/01 https://seekingalpha.com/news/3394026-bloomberg-shell-partners-set-approve-31b-lng-canada-project?app=1


There are plenty of very selective analysis on RDS. If the RDS investor relation would write an analysis it would look similar. The main negative points are not mentioned.


The capex of RDS is not sufficient to replace the depletion of the reserves. Thus the oil reserves and potential future production are shrinking.


The management is very saturated let itself press by green lobby groups to activities not in the best interest of RDS stakeholders. 2bn$ out of about 30 bn$/yr capex is wasted on green nonsense.


RDS focus more and more on LNG. It is expected that China & India increase their LNG use significantly. On the other hand India is very poor does not care about environment nor at all on the climate hoax and will prefer the cheaper coal. China is in a rivalty to the USA the potentially biggest LNG exporter. I assume that China will not increase its LNG imports as forcasted. The LNG market will not grow in the pace forecasted.Many analysts forecast China & India to absorb all the LNG produced in the future. Very often they believe that these countries will change their energy system acc. to the climate hoax hypothesis.


It seems possible that there might develop a LNG oversupply situation.



Shell CEO urges collaboration in tackling emissions


The guy is wrong!
The industrial civilizations are based on the use of fossil fuel instead of muscle power. The wealth of industrial nations is linear to the use of energy. That`s why it seems very unlikely that many countries will follow the climate hoax* and its message to develop back to middle age. 
Oil, gas, LNG, plastics are products that provide comfortable profit margins. That`s why I would go on developing oil fields, investing in downstream activities and avoid green nonsense. Even if Western Europe develops back in direction of the middle age there are enough young industrial nations to suck the oil and gas offered. 
*The "climate change" or better climate hoax is based on a very poor once scientific hypothesis that is communicated excellently by green NGO and taken over by left politicians. 
A green communist** believer should indeed not buy XOM, or other oil or coal companies and perhaps no other stock.


The green religion demands its believers to reduce the global CO2 emissions by 80%. The US and Europe consume above average it is to reduce the CO2 emissions by 95% in the US and 90% in Western Europa. That means no heating, no AC, no motor vehicle, no electricity....like the middle age. Most probably no investor will earn any money in the long term if the world should develop acc. to the visions of these green communists.


The climate hoax* is popular in Western Europe and the coastal states of the US plus a few countries in Aisa. Worldwide there are perhaps 400 - 500 million green believers. On the other hand there are about 6 bn poeple on earth that don`t know, don`t care, don`t believe in the green religion and wish to live a life similar to the US middle class. Thus it seems very likely that there is someone who pays for oil, gas and coal in 10 - 20 or 30 years.

The best advice is: Drill baby drill!



*The "climate change" is based on a poor hypothesis communicated excellent and taken over by left socialist politicians in many countries. My analysis


**Socialism and communism have shown each time they seized power that they can destroy a society or at least an economy from UDSSR, North Korea.... Most remarkable is that they managed to develop Venezuela the country with the biggest oil reserves to poverty.


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