Royal Dutch Shell

Royal Dutch Shell

29 January 2019Reading time: 3 minutes

During an interview with the British newspaper The Guardian by the end of last year, board member of Royal Dutch Shell Maarten Wetselaar told about the ambitions of the oil and gas company to increase their investments in non-fossil fuels from 1-2 billion dollar per year to 4 billion dollar on an annual basis.

One of the options to strengthen the position of Shell in sustainable energy, which Wetselaar mentioned during the interview, is by doing acquisitions. Early 2019 the company took action. Alongside with pension provider PPGM, Shell wants to make an offer on Eneco. The Dutch energy company is currently owned by 52 Dutch municipalities. They already announced by the end of 2018 the intention to sell Eneco through a ‘controlled auction’. Analysts anticipate on a selling price of approximately 3 billion euro.

Both Shell and PGGM want to extend Eneco to a European player, by making domestic and foreign investments. Also both parties want to retain the green character of the energy company. It remains to be seen if Shell will eventually succeed to take over Eneco.

The stock price of Royal Dutch Shell is strongly related to developments of the oil prices, which have been under pressure for some time now. Therefore the oil cartel OPEC decided in December to decrease the oil production with 1,2 million barrels a day, with effect from January 2019. This caused a short uplifting of the oil prices.

However, weak import- and export figures from China have again put pressure on the oil prices. China is the second largest oil consuming country of the world and has an important growth booster of the global economy for many years. A slowdown in the growth of the Chinese economy, could fuel the fear of a global economic slowdown. At the same time there are not many signals that the oil demand in China has decreased in the past period. Data from news agency Reuters shows that the import of oil in December, has even risen with 30% on an annual basis. It remains to be seen how the oil prices will develop in the coming period.

The stock price of Shell has strongly declined in the past quarter. Early October the stock price was still higher than 30 euro but is by now 12 percent lower at 26,40 euro (14-01-2018). Partly as a result of the decline, the price-to-earnings ratio is now 11,7 with a dividend yield of 6,1 percent.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

Vontobel products on Royal Dutch Shell are tradable at DEGIRO.

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18/10/2019 16:11:19