Shell announced the record first-quarter profits on Thursday, saying it had seen “strong results in volatile times.” The results come at a time when calls for a windfall tax in the UK are getting increasingly louder amid the cost of living crisis which is pushing many families to breaking point.
The energy sector has been reaping the benefits of soaring energy prices in recent months, pushed up further again by the Russia-Ukraine War and rocketing demand as economies begin to recover from the Covid-19 pandemic.
“The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted,” said Shell CEO Ben van Beurden.
“The impacts of this uncertainty and the higher cost that comes with it are being felt far and wide. We have been engaging with governments, our customers and suppliers to work through the challenging implications and provide support and solutions where we can.”
“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel — despite being made with security of supplies at the forefront of our thinking — was not the right one and we are sorry,” said Shell CEO Ben van Beurden.
“We will work with aid partners and humanitarian agencies over the coming days and weeks to determine where the monies from this fund are best placed to alleviate the terrible consequences that this war is having on the people of Ukraine.”
Shell said it will now immediately cease all spot purchases of Russian crude oil and that it will not renew contract terms. The oil giant will gradually withdraw all hydrocarbons, including crude, petroleum products, gas, and liquified natural gas.
Shell has also said it will shut its service stations in Russia, as well as its aviation fuels and lubricants operations. At present, Russian oil constitutes 8% of Shell’s working supplies.
In the 12 days since Russia began its unprovoked invasion of Ukraine, more than 2 million Ukrainians have fled their country. This is according to a tracker from the UN refugee agency.
The Anglo-Dutch energy firm plans to simplify its structure to a single class of shares to boost shareholders payouts, thus creating a large single pool of ordinary shares that the company can buy back. Following Monday’s news, shares in Shell surged by as much as 2.5%.
The move by Shell comes as a bid to “strengthen its competitiveness” and less than a month after Wall Street activist Third Point revealed a stake in the energy firm.
Third Point, founded by Dan Loeb in 1995, had previously called for Shell to split into multiple businesses to increase its market value and boost its performance. Meanwhile, Shell said the changes would “increase the speed and flexibility of capital and portfolio actions” as the firm gradually shifts from oil and gas to sustainable energy.
“The Board unanimously believes that the Simplification will strengthen Shell’s competitiveness and accelerate both shareholder distributions and delivery of its strategy to become a net-zero emissions energy business,” Sir Andrew Mackenzie, Chair of the Board of Royal Dutch Shell said.
As the stock markets fluctuate and countries head into recession, we're starting a series looking at the stocks with the most potential for good returns with analysis and expert from the Finance Monthly team. This week, we're looking at Countryside Properties and Royal Dutch Shell:
Countryside Properties
Covid-19 has severely hit the housing market in the UK and this morning FTSE 250 company Countryside Properties PLC (CSP) reported that it lost completions and land sales in March which has impacted profit by £29 M and increased debt by £83 M. As of writing the share price had dropped 10% at the opening. With the housing market key to any economic recovery I would expect to see developers to do much better in the coming months as the lockdown is eased.
Royal Dutch Shell
With the world’s economies grinding to a halt oil prices have hit new lows in recent weeks. Royal Dutch Shell Plc (RDSA: LON) has seen its share price drop by over 52% from its 12 month high but there is no doubt that oil will be in great demand once the economic recovery finally gets underway. It seems to me that the world’s biggest players in the energy/petrochemical sector have enough in reserve to weather the storm and Shell, in my opinion, did the right thing but cutting its dividend – the first cut since WWII. No doubt it will be a bumpy ride ahead, but Shell stock looks like good value as things stand.
Please invest responsibly. Views expressed on the companies mentioned in this article are those of the writer and any investment undertaken should be independently investigated by the investor. Finance Monthly accepts no responsibility for any investment. For more information visit our stock disclaimer
This week Shell announced that it has been chosen by Rolls-Royce Motor Cars Ltd as the exclusive manufacturer and supplier of Rolls-Royce Motor Cars Genuine Engine Oil. From October 2016, this oil has started to become available to Rolls-Royce Motor Cars Dealers around the world.
The new passenger vehicle engine oil has been developed and rigorously tested to meet the latest Rolls-Royce Motor Cars Ltd. passenger vehicle engine specifications and to work perfectly with their V12 engines. Shell PurePlus Technology, present in Rolls-Royce Motor Cars Genuine Engine Oil, helps protect the engine from power-robbing deposits and sludge. In addition, its properties enable the oil to reach peak operating efficiency sooner in challenging conditions with low oil consumption and long engine service life.
"We are delighted to have been chosen to develop and supply the new passenger vehicle engine oil for Rolls-Royce Motor Cars Ltd., using our most recent innovation – Shell PurePlus Technology," said Richard Jory, Shell's Global Vice President for Lubricants Key Accounts.
Shell PurePlus Technology is a breakthrough in how passenger vehicle engine oils are formulated. It is a patented gas-to-liquid (GTL) process, developed over 40 years of research, which converts natural gas into crystal clear base oil. Base oil, usually made from crude oil, is the main component of finished oils and plays a vital role in the quality of the finished passenger vehicle engine oil. The base oil is produced at the Pearl GTL plant in Qatar, a partnership between Shell and Qatar Petroleum.
(Source: Shell)
Royal Dutch Shell has announced a £47 billion (€65 billion) merger deal with BG Group, which would reportedly make the combined company worth 9% of the FTSE 100, if it goes through.
The deal, already touted to be the biggest of the year, could produce a company with a value of more than £200 billion (€276 billion).
Big cost savings would result from the merger with Shell and BG Group expected to save $2.5 billion (€2.3 billion) a year, following the deal.
The acquisition would also add 25% to Shell’s oil and gas reserves and a 20% boost to production capacity, with big gains in the Australian liquefied natural gas market and the offshore oil fields of Brazil.
For shareholders and fund managers, the deal could add an extra layer of complexity to investment structure. UK funds may have difficulty accommodating the size of the new enlarged Shell group, because of rules which limit a fund’s exposure to any one company.
“The new merged entity would be by far the biggest company in the UK stock market, and its size would present difficulties for some funds which invest in UK shares. In particular closet trackers and pension funds could eventually find themselves outside of their comfort zone in terms of their active position, unless they rejig the rest of their portfolio to look more like the index to compensate, or abandon their index-hugging philosophy,” said Laith Khalaf, Senior Analyst, Hargreaves Lansdown.
The new combined group after merger would make up around 9% of the FTSE 100, based on its current valuation, and around 7.5% of the FTSE All Share. This may in due course present a challenge for some pension funds and closet trackers, which manage their portfolios largely in line with the benchmark index, pointed out Khalaf.
“This is because regulations prohibit active funds from holding more than 10% of their portfolio in one company. While this is not a problem at current valuations, should the combined group breach 10% of the UK stock market, for instance on the back of an oil price recovery, these funds may find themselves having to sell Shell stock to comply with this rule,” he explained.
