Shell Share Discussion Threads

[zyzzyva] 20/1/2016 11:21

WhiskeyInTheJar their only hope is a dramatic bounce in energy prices. that is pie is the sky stuff. dont be fooled, the value destruction here is gigantic, it will result is mammoth asset write downs and the dividend cannot be sustained, even at half current levels, if the deal is completed.

[whiskeyinthejar] 20/1/2016 11:10

Says cost of dividend will be $15 billion in 2016 assuming BG deal completion.

Commitment is to borrow as necessary for divi. Gearing 15% end of 2015 so they can borrow that $15 billion in full and pay for BG. BG has $6billion cash reserves, so that offsets the $18 Billion cash element required to buy BG a bit. Looks solid to me.

I don't see how BOD can go back on their word without investors questioning whether anything they ever said again was trustworthy. Lots of very unhappy pensioners. IIRC Shell accounts for about 10% of all FTSE 100 dividends.

Shell might even leave themselves liable to litigation for providing misleading information if they said they are not going to bother borrowing for the dividend. But more likely I'd expect Ben to resign and be very embarrassed down the tennis club. Nobody wants to invest in a company that lies.

[zyzzyva] 20/1/2016 11:00

yes it is because of this disastrous acqusition

[eisler] 20/1/2016 10:57

Holy cr@p - 1200 coming into view...

[zyzzyva] 20/1/2016 10:46

imo the BOD are being hugely irresponsible. if the deal was called off, what would BG shares be? imo they could easily be below 200p. BG has $10bn debt and was burning cash in Q3. i cannot work out Q4 given the lack of information in todays announcement. but average oil prices were around $51 in Q3, around $45 in Q4 and are now below $28!

[leonasdad] 20/1/2016 10:41

better to work out the nominal price of the asset between two timeframes factoring in trade volume/price ratio.
Starting from today and ending with the economic life of the asset (years) as the second data point.

31 pence after wet finger in the air

[astjgroom] 20/1/2016 10:40

This deal is dead. Needs to cancel desperately, management won't as they don't wanna look like idiots. Good management would cancel. Wait 6 months or however long and re-approach. All in my opinion, not meaning to upset.

[essentialinvestor] 20/1/2016 10:34

33 pence on a quick calculation.

[zyzzyva] 20/1/2016 10:34

Minerve it might well be . but it comes down to "opportunity cost" - all other assets are based on current prices. with $60bn , they could buy the world now compared with in april 2015 when this deal was struck

[minerve] 20/1/2016 10:32

Perhaps today's spot price is cloud cuckoo land.

[zyzzyva] 20/1/2016 10:30

Minerve the spot price today is completely relevant. todays view of prices is the basis for what all assets are priced. anything else is cloud cuckoo land

[zyzzyva] 20/1/2016 10:29

i think you forgot to take out the RDSB final dividend. i think the discount is now only 2.7%

[minerve] 20/1/2016 10:27

Some of you are forgetting that the deal is underpinned on the premise of where the companies predict the oil price is going to be in the medium term. The spot price today is to some extent irrelevant and the price the deal was done is only relevant in the extent that the _premise_ doesn't move to far from the price of the deal.

It is very difficult to price oil and copper when you have hedge funds who are purely using the commodities as a form of speculation. I personally believe commodities should not be allowed to be hedged, other than by the commodity producers themselves, and perhaps, major commodity consumers like steel mills.

[sogoesit] 20/1/2016 10:23

I think the clue to Shell's current share price valuation is in the offer to BG.
If you buy, or have bought, Shell, through BG, in the last few months/weeks the equivalent purchase price of your Shell shares, including cash is and has been around 1200p relatively constantly.

Today, at 916p BG and 1290p for RDSB you're purchasing Shell at 1196p.

The more likely the deal going through the closer RDSB's share price will be to this "equilibrium" price.
I have bought into Shell through BG and that has been my evaluation... around 1200p.

Don't forget the 19% dilution soon... albeit that Shell say they will buyback shares to neutralise this it will take a good few years to do.
In the mean time our holding or purchases pay 10%; that's the price for all this risk. Seems reasonable on a 5-10 year view (10 year payback).

[By the way I am agnostic/ignorant about capital losses. For some high income shares all I care about is the income. That's because, on a long term basis, I won't pay for the losses... my children or the taxpayer will!]

[zyzzyva] 20/1/2016 10:14

RDSB is plunging 6% today, while BG has fallen just 2% because the BOD is still determined to push through with the deal.

and as we know, this deal is extremely value destructive to shell shareholders (price was agreed on basis of $70 oil price).

[zyzzyva] 20/1/2016 10:11

WJ i am not. it is simple math. at current RDSB price shell is paying $19bn cash, $28bn in shares and is taking on $10bn debt for a total deal value of $57bn or £40bn

[minerve] 20/1/2016 10:11

For some of you who want to take your mind off the terrible markets today, I found an article on the oil majors which is very good and worth a read:

[badtime] 20/1/2016 10:10

1288 added

[minerve] 20/1/2016 10:08

Essential,

I invested in RIO, RDSB & BP yesterday. I gave-up on some of my growth stocks that had low yields. I decided that in this market my growth stocks were not going anywhere and so I invested for increased income. If the dividends half they are still good yields.

[w1ndjammer] 20/1/2016 10:06

Zyzz

you can not count the debt twice

WJ.

[essentialinvestor] 20/1/2016 10:05

Hopefully M, 1291 added.

[minerve] 20/1/2016 10:03

And increasing $ and decreasing pound. If the oil price does start to return towards higher prices what an investment!

[zyzzyva] 20/1/2016 10:03

must surely be impossible. imo dividend will have to be slashed in half at least.

there is i think a 19% dilution with the BG deal, they are taking on nearly $30bn debt with the BG deal, and at current energy prices BG must be burning through loads more cash based on the terrible Q3 results.