Royal Dutch Shell Dividends - RDSB

Royal Dutch Shell Dividends - RDSB

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Stock Name Stock Symbol Market Stock Type Stock ISIN Stock Description
Royal Dutch Shell Plc RDSB London Ordinary Share GB00B03MM408 'B' ORD EUR0.07
  Price Change Price Change % Stock Price Last Trade
16.60 1.2% 1,404.20 16:29:59
Open Price Low Price High Price Close Price Previous Close
1,415.00 1,388.60 1,422.40 1,404.20 1,387.60
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Industry Sector

Royal Dutch Shell RDSB Dividends History

Announcement Date Type Currency Dividend Amount Period Start Period End Ex Date Record Date Payment Date Total Dividend Amount

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sarkasm: Don't Sell Shell Feb. 04, 2021 5:24 PM ETRoyal Dutch Shell plc (RDS.A), RDS.BRYDAFRYDBF1 Comment2 Likes Summary Shell's dreadful stock price action in 2020 is coming to an end. All the bad news has been priced in and the stock offers good value now. Oil fundamentals look supportive but even with flat oil prices, Shell's financials look to be getting stronger, providing strong dividend cover. The Strategy Day on 11th February could offer a catalyst for investors to reconsider Shell as a serious Energy Transition investment option. The December 21st trading update from Royal Dutch Shell (RDS.A) largely foresaw the torrid Q4 results and 2020 full year results just released. In a nutshell, 2020 was an exceptionally challenging year for the oil major. What should Shell shareholders do? While the company is trying to reposition itself for the new energy landscape ahead, the headlines have been consistently bad for the Anglo-Dutch company. Profit warnings, write-downs, collapsing prices for oil, collapsing refinery margins, the first cut in dividends for decades, a falling share price, and finally the departure of several clean energy executives amid internal arguments over its clean energy strategy have all contributed to the bear market in Shell's stock in the last year. The 36% fall in the stock price over the last year sounds bad, but there is a fundamental truth in oil markets and that is that the cure for low oil prices is low oil prices. That’s why the weakness in the sector, the cutbacks in production and investment will cause higher oil prices going forward, as I have already pitched in a recent Seeking Alpha article on crude oil, that so far is playing out nicely. The pessimism about Shell, coupled with some positive signs on the horizon and my bullish outlook on oil in fact make Shell a very good contrarian play. The fact that December’s profit warning did not do much damage to the share price suggests that all the bad news is already priced in and indeed the stock has started to rise over the last couple of months. The Global Investor thinks this recent price action isn’t a dead cat bounce, but the start of a rally back to a fairer, higher price for Shell's stock. Oil majors have traditionally been core income stocks for many portfolios but after the first dividend cuts in decades last year, when the dividend was cut 66% it has since been raised slightly in October and now been raised again slightly some more. This gives the stock a current dividend yield of about 3.6%. What’s more, Shell is still slashing costs and capital expenditure, like the rest of the oil and gas industry, and US shale output is falling thanks to weak pricing. This suggests low prices will squeeze out uneconomic supply and help oil prices continue their recovery. And with the rollout of vaccination programs, some oil demand lost in 2020 should come back in 2021, further tightening the supply-demand balance towards higher oil prices. Another contrarian indicator is that the oil and gas industry is now hated by institutional investors, either for financial reasons or for environmental, social and governance - ESG - reasons and this has simply gone too far. The weighting of the Oil & Gas sector in the main stock market indexes is at lows last seen in the 1990s when oil prices ranged from $10-$20 per barrel. Risks This brings us to the risks of owning Shell right now. ESG is a new force in the markets, so some investors simply won’t look at Shell for a long time. Long-term oil demand has probably peaked and the switch to renewable sources of energy will be bumpy as the company is finding in its transition efforts to date. Shell also has the risk that it gets stuck with “stranded assets” with its large reserves of oil and gas. This means Shell’s book value is bound to be higher than its market value as investors price in further write-downs to its asset values. Shell has traditionally been a very reliable dividend payer, but the energy transition makes it almost impossible to balance the needs of high dividend payouts with the large investments required in greener energies. While the dividend has been cut deeply to a lower level, investors cannot assume it will rise back to its previous level quickly as the volatility in energy markets and the restructuring needs of Shell will probably dictate otherwise. Indeed, Shell's management has called it a dividend "reset". The future It is expected that Shell will outline a radical new strategy at its investor day scheduled for February 11th. The new strategy, likely to focus on clean energy, and to more closely follow BP’s radical restructuring plans that started last year, could appeal to investors who are looking more at the rate of change in ESG factors than in the absolute level of how good a company is on current ESG measures, specifically with respect to climate change and carbon emissions. Strategy Day on February 11th Ultimately, The Global Investor expects Shell to try to strike a balance between driving meaningful change towards 'Net Zero' emissions but also to maximize value from existing businesses over the intermediate period. The following are some of the topics I expect Shell to cover in the forthcoming Strategy Day which I expect to help turn market sentiment back towards Shell’s favor. Net zero by 2050 or earlier – Shell already outlined this target back in April last year but didn’t give much detail and so wasn’t seen as that credible. Shell will probably present its business plan in more detail to get to these targets. Upstream oil & gas to underpin cash generation. Having made the mega acquisition of gas major BG Group back in 2016, Shell is more committed to oil & gas than BP who have outlined plans to cut production by 40% over the next decade. Given Shell's project pipeline, its portfolio still has some growth potential but during last year’s Q3 results CEO Ben van Beurden said "It’s probably fair to say that 2019 was the high point in terms of oil production". So Shell is probably keen to keep a relatively flat production profile as it looks to sell non-core positions as it uses its Upstream division to act as a key contributor to cash generation over the next decade, through both operations as well as disposals. While this might disappoint ESG investors who argue for more aggressive action, it will keep dividend investors happy as this strategy reduces risks to free cash flow generation. Strength in natural gas, the bridge fuel. Shell is the world’s largest player in LNG so it’s likely Shell will highlight the role of natural gas as the “transition fuel” helping reduce carbon emissions because of its cleaner properties compared to coal and its vital role in electricity generation. The term "bridge" comes about because natural gas can support renewables over the period where wind and solar still suffer from intermittency issues. In 2019 Shell said it expected the LNG market to grow at 4% per year over the next few years. Last year management said Shell’s LNG business will not necessarily match the market "percent for percent" which might mean lower capex needs in this division. LNG will remain a key cash generator over the next decade so expect updates on Shell’s LNG outlook on 11th February. Growth opportunities in hydrogen and biofuels. For renewables, Shell will likely emphasize both hydrogen and biofuels given hydrogen is a natural fit as it is already produced and consumed in Shell’s refining business. Shell already has about 50 hydrogen fueling stations mostly in Germany and California. In biofuels, Shell is one of the largest blenders and distributors globally, partly due to its 50:50 joint venture with Raizen in Brazil. Shell will likely highlight its expansion in wind and solar, businesses which are getting extremely competitive now. Shell will look to leverage its strong Marketing and Trading positions to sell more electricity to the customers who currently buy fossil fuels from their large global customer networks. New Energies to account for about 25% of capital expenditure over the next few years. At last year’s 3Q earnings announcement, Shell guided that capex would remain in the $19-22 billion range over the coming years. It gave high level guidance on the breakdown between segments: 35-40% for Upstream, 35-40% for “Transition business”, which includes Integrated Gas, Chemicals and Refining, and about 25% to growth businesses such as Marketing, Power, Hydrogen, Biofuels and carbon capture, utilization and storage with nature-based solutions. The Global Investor expects Shell to update this breakdown and give more detail. Overall, hydrocarbons will remain part of Shell’s core strategy over the next decade. This gives it less execution risk on restructuring compared to its great rival BP, but makes it more exposed to oil and gas commodity prices. While ESG investors do play a role at the margin, and maybe a larger role in Europe, The Global Investor still believes the stock market is overall, at least in the long term, amoral. Short term trends matter and ESG has driven investors away from oil & gas but it could also be argued that that’s mostly happened because of weaker financial returns in the sector. If Shell can raise its profits through higher oil prices, Shell can raise its dividends and investors will put a higher valuation on the stock because of higher dividends. Dividends So, it comes back to dividends ultimately. That has always been the driver of Shell’s share price. Assuming oil prices at about $50/bbl over the next few years – more conservative than my actual view – I think Shell will generate $13-14 billion in free cash flow each year. At current dividend levels this implies dividend cover of about 2.5x, a very high number for Shell historically. This means Shell's balance sheet will start to de-leverage quickly. Management has indicated that when net debt falls to about $65 billion it will re-start its share buyback program. This could happen around the middle of next year if oil prices hold. Currently, Shell is guiding for 4% dividend growth per year, but there is big upside potential to this number. Before the dividend reset last year, Shell’s dividend had become unstainable given the investment needed in the energy transition. Valuation Shell’s dividend yield over the last 10 years had bounced around the 6% level as it was always assumed the dividend was unstainable. After the reset a much lower more sustainable dividend yield would be more like 3.5% or 3.6%. Taking 3.6% to be conservative, and a forecast full year 2022 dividend of $1.39 per share for the “A” class ADRs would give us a stock price of about $39, or about 6% higher than where it is at the time of this writing. While this isn’t massive upside, the dividend yield of 3.6% and dividend growth of 4-5% per year offers us good stability. All this assumes conservative oil price forecasts and gives Shell ample room to de-lever and increase share buybacks or accelerate dividend growth, which should further put a bid on the stock price. Conclusion Value investors and income seekers should continue to own Shell. Shell is very likely to always be a “Supermajor221; but with its focus shifting gradually towards energy in general and away from its historical reliance on oil but gas will play a major role for a long period. Energy is a core need in society so Shell is likely to be able to keep its large size and retain its status as a core “income portfolio” position thanks to strong and stable dividends. In the short term, rebounding oil prices should help near term cash flows and hence drive stock price appreciation. A successful investor day on February 11th could help change Shell’s perception amongst the sustainable investment crowd and market sentiment towards companies through lowering the climate / sustainability / reputational risk for institutional investors in owning Shell. This sustainability focus for investors accounts for a very large section of European institutional investors now. So things are improving now and it's likely we've seen the low in the Shell share price. The bottom line is that Shell is worth holding as a small part of your portfolio.
maywillow: Shell: What It Will Take To Be Investible Again Jan. 19, 2021 5:15 AM ET| Summary Shell's dividend cut and unpredictability last year cost it a lot of shareholder confidence. I outline three metrics I think show whether it's investable again. On all three metrics, I continue to see it as uninvestable with confidence. U.K.-based oil major Shell (RDS.A, OTCPK:RYDAF) didn’t have a great time of it last year when it came to shareholder relations. With its mammoth dividend cut and poor signaling thereof before it was made, a lot of shareholders ditched the holding. I sold my entire stake and reinvested the proceeds in more Exxon Mobil (XOM). Below, I outline what I think are the key challenges to Shell being investable at this point. 1. Shareholders Need Faith in Management The single biggest challenge facing Shell’s prospects right now, in my view, is the low quality of its management from an investor’s perspective. The way that the dividend cut was handled was terrible. Shell is a key holding for many U.K. and Dutch holders, including pension funds and the like. So, a 70% cut just a couple of months after guiding investors not to expect a cut is simply not professional at all, in my view. It doesn’t behoove management of as large and economically important a listed company as Shell to behave in this way. Management lost credibility with many shareholders, and frankly, it was on such a scale that I won’t have faith in current management again, period. I thought the chief executive ought to have done the decent thing and resigned. But I also don’t see evidence that current management deserves to regain investor confidence even if one isn’t as critical of how they handled the dividend cut. For example, in comments accompanying the third quarter earnings presentation, the finance chief said: “we re-based our dividend to protect our balance sheet in response to the profound impacts of the pandemic”. That feels disingenuous to me. A 70% cut on an ongoing basis is not justifiable purely in terms of pandemic impact. The company seems to continue to message its shareholders without respecting their intelligence. For me, this is the biggest issue at the moment when it comes to the investment case for Shell. Whatever its asset base or strategy, if it doesn’t have appropriately skilled, reliable management, it’s a speculative punt, not an investment. 2. Visibility on Future Earnings Streams One of the big debates in the energy sector is future demand for oil and gas versus other forms of energy. I’ve set out elsewhere why I don’t think oil demand is going to fall anytime soon, but there are well-considered and very different perspectives across the spectrum of the debate. For an example, I recommend Tudor Invest Holdings’ piece Royal Dutch Shell: More Than Just Oil And Gas. One approach, which I would say Exxon is taking, is doubling down on the core business of oil and gas. That is a straightforward play on future oil and gas demand and pricing. An alternative approach is to move to an asset portfolio which over time produces more energy from sources other than oil and gas. Some are more environmentally damaging, in my view (wind turbines, for example), so I don’t use the moniker “green”. The point is, they’re not from oil and gas. A number of – primarily European – energy majors have committed to this approach. While it’s the case for Shell, it is also happening at BP (NYSE:BP), Total (NYSE:TOT) and Equinor (NYSE:EQNR), for example. So, Shell management is basically moving in lockstep with the European energy sector in its approach here, rather than acting independently. However, in terms of being investable, the question is what this means for future earnings. Exxon’s approach is simple to understand: one needs to look at future demand, pricing and the company’s production volume and costs. While those are all moving parts, it’s fairly easy to construct different models depending on one’s broad thesis about future oil and gas demand. By contrast, earnings from the sorts of energy sources Shell is getting into now are much harder to forecast. Markets remain heavily subsidized and immature, so the long-term economics are unclear. I set out in my piece Shell And The Myth Of Oil Major Green Energy my concerns that the company’s strategy was slow to execute, with unproven results. That remains the case. In its third quarter earnings, upstream and midstream results both came with financial figures attached. The so-called “growth” business did not. Shell now sees its upstream energy business as a cash cow to fund its move into other areas, and pay shareholder distributions. This is clear from a slide it shared with its Q3 earnings. Source: Q3 earnings presentation That also matches the approach the company management is taking to its oil production. The CEO is reported as saying that Shell’s oil production probably peaked in 2019. So, the company expects to reduce its output of its cash cow product, meanwhile expanding in other areas whose profitability is unproven and unknown. The key point here is not whether oil demand peaks, factor outside the company’s control. The issue is that the company is proactively planning to move to a product mix, which seems less profitable, and which is likely, therefore, to lead to structurally lower earnings in the long term, notwithstanding fluctuations in the oil price. 3. A Clear Dividend Logic Shell set out its new, clear dividend policy with its third quarter result: a dividend increase of c. 4% annually, subject to board approval. Additionally, it set out (as a lower priority) total shareholder distributions of 20-30% of operating cash flow on reaching net debt of $65 billion. Net debt at the end of September stood at around $73.5 bn. Once the debt comes down, these additional distributions could include both share buybacks and dividends. That means that, at its current price, Shell has a prospective forward yield around 3.5%, which is decent for an FTSE-100 constituent. The cut has also increased dividend cover, something the company highlighted alongside its inaugural 4% increase last year, although it's hard to say for now what the long-term cover is likely to be. So, there is a dividend policy. But I do not see a solid logic in it. First, why a meaty (4%) raise just months after a 70% cut? I just stole your wallet but, hey, here’s your cab ride home! Longer term, why 4%? It sounds attractive to potential investors. But with oil price movements and the unproven economics of Shell’s future focus, setting out a plan for a consistent annual rise lacks logic. While the clear dividend policy is welcome, I would like for a clear dividend logic also. Currently, I think it’s missing. That matters because if the dividend keeps growing by 4%, sooner or later (perhaps later), the company will come up against the same challenge it faced last year: how to sustain a payout level which has been rising, if oil prices crash? Conclusion: I Regard Shell As Uninvestable I sold my Shell position at a loss and reinvested it in Exxon, because I maintain faith in oil and gas as a long-term investment theme but don’t maintain faith in Shell. For me to consider it as being investable again, it would need to demonstrate that management is capable, it has a plan to sustain or increase earnings in so far as it can do so with the levers it can pull (of which oil price isn’t one) and that the dividend has a logic which doesn’t just run it up for years or decades and then heavily cut it again in future. For now, I consider it to fail on all three metrics.
la forge: Thus taking its toll on divi pay if trend continues up cheers Skinny DIVI DATES Https:// 4th quarter 2020 Event Date Announcement date February 4, 2021 Ex- Dividend Date for ADS.A and ADS.B February 18, 2021 Ex- Dividend Date for RDS A and RDS B February 18, 2021 Record date February 19, 2021 Closing of currency election date (see Note below) March 05, 2021 Pounds sterling and euro equivalents announcement date March 15, 2021 Payment date March 29, 2021 Note A different currency election date may apply to shareholders holding shares in a securities account with a bank or financial institution ultimately holding through Euroclear Nederland. This may also apply to other shareholders who do not hold their shares either directly on the Register of Members or in the corporate sponsored nominee arrangement. Shareholders can contact their broker, financial intermediary, bank or financial institution for the election deadline that applies.
the grumpy old men: Shell Stock Could Soar 68%, Analyst Predicts By Avi Salzman Dec. 23, 2020 11:13 am ET Order Reprints Print Article promotion Text size The Shell logo Scott Barbour/Getty Images In a difficult year for oil stocks, Royal Dutch Shell has been one of the worst performers in the industry. It cut its dividend sharply in April, announced thousands of layoffs, and has now written down its assets twice, to the tune of more than $22 billion. Shell (ticker: RDS.B) stock is down 42% this year, worse than the Energy Select Sector SPD exchange-traded fund (XLE), which is off by 33%. But MKM Partners analyst John Gerdes says Shell shares could rebound by 68% as the company gets leaner and transitions its business to add more renewables. Gerdes thinks Shell’s investment in renewables isn’t just an attempt to mollify regulators; he projects that the projects that Shell is investing in like wind energy could offer 10% returns on average. Gerdes’ price target is $57, 68% above the stock’s price before the report was issued. Shell stock rose 3.3%, to $34.62, on Wednesday following the upgrade. Gerdes doesn’t expect Shell to return to its prior results from before the pandemic. The oil giant earned $17 billion on $350 billion in revenue in 2019. He projects Shell will earn $9.6 billion on $287 billion in revenue in 2022. But cost cuts mean that Shell should be able to produce more than enough cash to invest in its best projects, plow more than $2 billion a year into renewables by 2023, and cover its dividend with considerable room to spare. From 2021 through 2025, Gerdes expects Shell to generate about $91.5 billion of free cash flow, which is about 70% of the company’s market cap. It no longer has the double-digit dividend yield that it had at its height this year, but its current yield around 4% is not too shabby compared with corporate bonds and sovereign debt. Shell has one of the largest networks of gas stations in the world, and its renewables could build on that network—it has already added about 50 hydrogen refueling stations in the U.S. even though that technology is still nascent. Write to Avi Salzman at
sarkasm: Royal Dutch Shell dividend increases? In terms of expectations, analysts estimate that Royal Dutch Shell will earn more in the future as demand potentially rebounds thanks to Covid-19 vaccines. Although analysts expect RDSB to earn just $0.71 per share for FY 2020 due to the pandemic, they expect the company’s earnings per share to recover to $1.34 per share for FY 2021. Things could get even better after that as analysts expect the company to earn $1.99 per share for FY 2022, and $2.37 per share for FY 2023. If RDSB achieves or even surpasses those earnings numbers for FY 2022 and FY 2023, management could conceivably increase the dividend back to the pre-Covid level of $1.88 per share in FY 2019. With that said, I don’t think a quick dividend recovery will happen. Although Royal Dutch Shell’s could theoretically pay the same amount of dividends as they did before the pandemic if earnings recovers by FY 2022–23, management has said they don’t plan to raise the dividend by much. Rather than increase the dividend a lot, they have said they hope to continue to raise it by around 4% in the following years. One reason is that management wants to pay down debt. As of the third quarter, Shell had $73.5bn in debt and management has said they want to get that number down to $65bn. Once they get the debt down to $65bn, management has said they “will target total shareholder distributions of 20-30% of cash flow from operation“. Royal Dutch Shell also needs money to transition into green energy. Many green energy projects don’t have as high of a return on investment as traditional giant oil and gas projects. As a result, Shell may have to invest more money to produce the same amount of profit. Is the stock a buy? Given that transitions are difficult, I reckon Royal Dutch Shell will face some headwinds in terms of its shift into a more greener energy mix. There could also be a variety of headwinds that make achieving analyst earnings estimates harder as well. Nevertheless I like management and I believe they can execute. If the company achieves its earnings estimates for the FY 2022/FY 2023, I think there could be upside. I’d buy Royal Dutch Shell shares at current prices and hold for the long term. The Motley Fool UK
the grumpy old men: The Shell share price rallied 10% last week. Here’s what I’d do right now Jonathan Smith | Monday, 30th November, 2020 | More on: RDSB The Royal Dutch Shell (LSE: RDSB) share price was one of the best performing FTSE 100 stocks last week. If we extend the time period to look at the past month, it’s up almost 50%. It’s true that the FTSE 100 has enjoyed a strong performance as a whole, but the Shell share price is still outperforming its Footsie peers. What’s been going on here? Why have Shell shares rallied? One of the reasons the Shell share price has performed well in the short term is the oil price. Crude oil was trading around $35 at the beginning of the month. Now it’s trading above $45. Historically, there’s been a strong correlation between the Shell share price and oil. After all, the business is what we call “vertically integrated” with oil. This means it’s active in all stages of the process. From exploration projects in oil fields, to refining it and then selling it in different forms. Therefore, it’s logical that the share price is heavily impacted by the oil price. On top of this, there’s been another external factor benefiting the company. The positive news last week, and in preceding weeks, about several different vaccines proving effective is a huge boost for Shell. If we rewind to Q2 results, oil products sales volumes were down 39%. This was mostly due to the aviation and retail sectors, as the pandemic meant consumers were staying at home. Demand for oil products simply wasn’t there. Now, if we flip to the prospect of a viable vaccine, flight demand should increase. I wrote a piece recently on how this could benefit the easyJet share price. Indirectly, demand for the refined products Shell offers will increase. This should have a knock on impact via a higher share price. What would I do now? The Shell share price still sits at a large discount compared to its level in January 2020. At 1,340p, the January level of 2,200p seen a long way away. So as a long-term buyer, Shell is definitely on my watchlist. But would I buy today? Perhaps not. In the short term, the reasons causing the rally aren’t really Shell-specific. The oil price and vaccine news benefit lots of other businesses as well. The rally hasn’t come from Shell doing something amazing. This makes me cautious of investing right now, and so I’m going to sit on the sidelines for the next few weeks. More in-depth Q4 results should be due in January. This, along with guidance for 2021, should give me a clearer picture on whether Shell should be my oil major of choice, instead of BP or other oil-related stocks. A big driver for me would also be any news about reinstating the full dividend that was cut earlier this year. I remember when I used to own Shell stock, I picked up a dividend yield of 5%-7%. A very generous yield returning would likely further boost the Shell share price as income investors buy the stock. Motley Fool UK
ariane: Oil & Gas Jamie Ashcroft 14:58 Tue 03 Nov 2020 Shell shares could see 20% upside says City analyst Morgan Stanley rates Shell as 'overweight' and sets a new 1,180p price target. Royal Dutch Shell PLC - Shell shares could see 20% upside says City analyst Royal Dutch Shell Plc (LON:RDSB) is the preferred ‘big energy’ stock for analysts at Morgan Stanley, with the American bank lifting its rating to ‘overweight217;. Morgan Stanley has set a new 1,180p price target (current price: 994p), up from 991p. Moreover, analyst Martijn Rats highlights that sector-wide the oil majors performed better than expected during the third quarter against a challenging backdrop, in which share prices have dropped by around 8%. Rats noted that important uncertainties remain for both the short and long term, and, not all companies face the same risks. But, the analyst highlighted that for the first time in a while he can argue that Shell offers greater than 20% of potential share price upside. “Shell's new financial framework and dividend policy send a strong signal about management's confidence in the firm's cash generating ability. “With a dividend yield of 5.4% and new guidance for annual dividend growth of 4%, Shell shares offer a steady-state total return of around 9.4% per year.” Morgan Stanley meanwhile upgrades BP to an ‘equal weight’ rating up from ‘underweight’. “Our Underweight rating for BP was driven by its uncertain earnings and cash flow outlook - even if its strategy is successful - and lack of dividend growth prospects. Following underperformance and its yield expanding to 8.1%, we suspect these factors are also discounted,” the analyst said. Proactiveinvestors
gibbs1: Https:// BP vs. Total: Which Oil Company Is Better Positioned for a Green Energy Transition? Two oil giants are making big bets about the future. Which approach is the better option for long-term investors? Reuben Gregg Brewer Reuben Gregg Brewer (TMFReubenGBrewer) Oct 31, 2020 at 10:35AM Author Bio European oil giants BP (NYSE:BP) and Total (NYSE:TOT) have both taken stands on clean energy, with each pledging its support for alternatives to oil. However, there's a notable difference in the business trajectories these integrated energy giants are taking. Here's a look at what the companies are doing, and what it could mean for investors. The quick change artist In August, BP cut its dividend in half. For dividend investors that was terrible news, but it was, to some degree, a sign of the times. The economic closures used to slow the spread of COVID-19 earlier in 2020 led to a massive drop in demand for oil and natural gas. With excess supply piling up in storage, energy prices plunged, and BP's top and bottom lines went along for the ride. However, there was more to this cut than meets the eye. Two hands holding blocks spelling out the words RISK and REWARD. Image source: Getty Images. Around the same time, BP announced it had a new business strategy. Basically, the global energy giant is shifting toward clean energy. That keeps it in line with current feelings toward carbon fuels as the world grapples with fears around climate change. However, it's a big change for an oil company to go green. For starters, BP intends to cut its oil and gas production by 40% by 2030, less than 10 years from now. Meanwhile, it wants to make a 10-fold increase in the number of electric vehicle charging points it owns, and a 20-fold increase in the amount of clean energy it produces. By 2030 40% of the company's capital spending is likely to be dedicated to low-carbon and clean-energy businesses. This is a "jump in with both feet" approach. If something goes wrong along the way, there's not much fallback room. The problem with this is that BP is one of the most heavily leveraged oil majors, with its roughly 1.1-times debt to equity ratio above those of all of its major peers. So it doesn't have much wiggle room. And it's counting on the oil business, which it will be shrinking, to fund its clean energy push. If oil's price recovery is slower than expected or there's lingering industry weakness, it could be hard for BP to generate the cash it needs to cover its debt load and its new business plan. Easy does it Total is looking to make big changes as well, but it's taking a drastically different approach as it looks to shift toward cleaner energy alternatives. It is projecting that its oil production will decline from 55% of sales in 2019 to 35% in 2030. However, natural gas production will increase from 40% to 50%. Natural gas is cleaner than oil and is viewed as a key transition fuel as the world reduces its carbon footprint. That said, Total's overall sales are projected to be higher, so oil and gas sales will actually be up slightly over that time frame -- not lower, as BP is planning. The remaining 15% of sales in 2030 will come from clean energy and electricity, up from 5% in 2019. That 5% figure is noteworthy, since Total has been more consistent in its investment in clean energy and electricity. For example, it has owned a stake in SunPower since 2011. BP, meanwhile, tried to rebrand as "Beyond Petroleum" at one point, signifying a shift toward clean energy. But it ended up dropping the idea and selling much of what it acquired in what proved to be an ill-conceived business plan. Total's capital spending plan is more nuanced as well. Between 2015 and 2019 Total spent about 10% of its capital budget on clean energy. It will up that to 15% between 2021 and 2025, and then 20% between 2025 and 2030. The goal is still to use the legacy oil business to fund a transition to clean energy, but to do it gradually and without materially shrinking what has historically been a very profitable segment. The big change in the oil business is that Total intends to refocus around its lowest-cost oil and gas operations so it can better compete in a world with low energy prices. BP Debt to Equity Ratio Chart BP Debt to Equity Ratio data by YCharts While Total also has a relatively heavy debt load, with debt to equity sitting at 0.77 times, the approach it is taking provides more wiggle room should things not pan out as expected. And it can always speed up its transition should it want or need to. It's a more balanced approach that conservative, long-term investors will likely find appealing. Which company is right? Nobody on Wall Street has a crystal ball, so it's impossible to know if BP's plan to effectively go all in or Total's slower shift will work out better. However, there is a fairly obvious risk/reward trade-off in each approach. If everything works as planned, BP will end up a big winner, and Total will look like it's moving relatively slowly. But it's worth noting that Total will still be moving in the right direction. U.S. peers ExxonMobil and Chevron are sticking with oil for now, which some might see as short-sighted. If the transition doesn't play out as BP is expecting, it could end up flat-footed and behind the pack because it is materially shrinking its oil and gas business. BP isn't exactly taking an all-or-nothing stance, but weak returns in the clean energy space could be a huge drag on the company's overall results. Total, on the other hand, will likely be able to take some setbacks in stride, since it is basically looking to maintain and upgrade its oil and gas business while still building a clean energy operation. For conservative investors, Total's approach looks more appealing. And it's worth noting that Total believes it can continue to support its hefty 10% dividend yield and fund its business transition as long as oil prices stay around $40 a barrel (though they've recently sunk below that level, so there is still dividend risk here). Still, the line in the sand aside, Total should be appealing to dividend investors looking to invest in the out-of-favor energy sector, with a bit of a clean energy hedge thrown in as a bonus.
sarkasm: Royal Dutch Shell plc Royal Dutch Shell Plc Second Quarter 2020 Euro And Gbp Equivalent Dividend Payments 08 September 2020 - 07:30AM Dow Jones News Print Share On Facebook TIDMRDSA TIDMRDSB The Hague, September 8, 2020 - The Board of Royal Dutch Shell plc ("RDS") today announced the pounds sterling and euro equivalent dividend payments in respect of the second quarter 2020 interim dividend, which was announced on July 30, 2020 at US$0.16 per A ordinary share ("A Share") and B ordinary share ("B Share"). Dividends on A Shares will be paid, by default, in euros at the rate of EUR0.1353 per A Share. Holders of A Shares who have validly submitted US dollars or pounds sterling currency elections by August 28, 2020 will be entitled to a dividend of US$0.16 or 12.09p per A Share, respectively. Dividends on B Shares will be paid, by default, in pounds sterling at the rate of 12.09p per B Share. Holders of B Shares who have validly submitted US dollars or euros currency elections by August 28, 2020 will be entitled to a dividend of US$0.16 or EUR0.1353 per B Share, respectively. Euro and pounds sterling dividends payable in cash have been converted from US dollars based on an average of market exchange rates over the three dealing days from 3 to 7 September 2020. This dividend will be payable on September 21, 2020 to those members whose names were on the Register of Members on August 14, 2020. Taxation - cash dividend Cash dividends on A Shares will be subject to the deduction of Dutch dividend withholding tax at the rate of 15%, which may be reduced in certain circumstances. Non-Dutch resident shareholders, depending on their particular circumstances, may be entitled to a full or partial refund of Dutch dividend withholding tax. If you are uncertain as to the tax treatment of any dividends you should consult your tax advisor. Royal Dutch Shell plc ENQUIRIES: Media: International +44 (0) 207 934 5550 Americas +1 832 337 4355
the grumpy old men: Royal Dutch Shell vs BP: which oil stock would I buy now? Stuart Blair | Wednesday, 2nd September, 2020 | Oil stocks have significantly underperformed the market this year. Royal Dutch Shell (LSE: RDSB) has fallen around 54%, while its counterpart BP (LSE: BP) has seen a drop of around 47%. Nonetheless, with Brent Crude now priced above $45, investing in oil stocks looks a far more attractive proposition than it did a couple of months ago. As a result, are BP and Royal Dutch Shell buys at their current prices, and which one is the best pick? Royal Dutch Shell Second-quarter earnings for the oil major were understandably very poor. In fact, after an impairment charge of $16.8bn, net income came to a loss of $18.1bn. On the face of it, these earnings paint a very gloomy picture. As such, it’s clear why the Shell share price has fallen nearly 20% since. Nevertheless, upon further inspection of the earnings, there are a number of positives to take away. For example, on an adjusted earnings basis, the oil stock actually made $638m. While adjusted earnings exclude one-off items and can potentially just ignore all the ‘bad stuff’, it’s still a great sign to see the company making a good profit in this challenging quarter. It also had positive cash flow of $243m. Although this does not cover the dividend as yet, I’m still encouraged that it’s in positive territory. This was mainly the result of the company reducing capital expenditures. Consequently, with average oil prices under $30 for the second quarter, I feel the worst may be over for Shell. With third-quarter results due at the end of October, a significant improvement could therefore be met with a sharp increase in the share price. BP After both cutting its dividend and announcing further investment into renewable energy, BP shares have fallen 13%. Of course, this does reflect the fact that the oil stock made an underlying loss of $6.7bn. Even so, the news has not been all negative for BP. For example, the firm has managed to strengthen its finances by issuing $11.9bn in hybrid bonds. Net debt has also been reduced by over $10bn since the first quarter, and this has subsequently seen gearing reduce by 3% to 33%. This contrasts with Shell, where net debt increased by $3bn following the first quarter. Despite the dividend cut, BP also has a greater dividend yield than Shell. In fact, the dividend is currently yielding around 6%, and there is no indication of a further cut. Instead, management has stated that once BP’s balance sheet has been deleveraged, it can start to return more money to shareholders through share buybacks. Which oil stock would I buy? Sitting at prices of 1,085p and 260p respectively, both of these oil stocks look very good value. As a result, I’ve actually invested in both Shell and BP, in anticipation of an oil recovery. If I were forced to choose just one however, I believe that BP offers the most upside potential. Although its transition to greener energy could hit profits in the short term, I think its long-term strategy should help its recovery prospects. Stuart Blair owns shares in Royal Dutch Shell and BP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer
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