While the BG deal will make Shell double the size of its nearest rival in liquefied natural gas production, that could prove a drag on earnings as LNG prices typically follow oil with a few months’ lag, according to BMO’s Warn. Even if the stock climbs to the 12-month target price of 1,863.25 pence predicted by analysts, that would still be about 24 percent below the record high of September 2014. Shell’s shares also dropped about twice as much as Exxon Mobil Corp. It reported an 53 percent decline in adjusted net income, wrote down more than $8 billion of assets and dismissed thousands of employees. The change in outlook for comes after The Hague-based company took a beating in the past year. The deal also gives Shell high- margin production in Brazil and Australia and gas assets in Kazakhstan, Trinidad and Tanzania. The company has announced it will realize $3.5 billion in operational synergies from BG. “There’s been a lot of cost cutting already, and they’ll probably find more synergies from the BG deal than they have announced.” “Shell’s balance sheet is safe even after the acquisition as we can see from the gearing levels,” said Alexandre Andlauer, an oil analyst at AlphaValue SAS in Paris. peer BP Plc had a ratio of 21.6 percent at the end of December, an increase of almost 5 percentage points from a year earlier. Shell’s projected gain is in addition to the 9 percent advance in its stock so far this year.Īfter using more than $10 billion of cash to pay for the acquisition, Shell’s gearing, a measure of its net debt to equity, will rise to “low-20 percent” from about 14 percent at the end of 2015, Chief Financial Officer Simon Henry said last month. Shell’s predicted share-price increase over the next year leads Eni SpA’s 11 percent advance, Chevron Corp.’s 7.9 percent gain and Total SA’s 7.1 percent, analyst estimates show.
“There’s also more trading confidence on oil prices and that helps the entire industry.” “Shell is among the most well-placed to benefit when oil rebounds, while it gains from improved cash flows when oil stays low,” Brendan Warn, a managing director at BMO Capital Markets in London, said by phone. With oil climbing about 40 percent from its January lows, Shell is helping to turn around an energy sector that was the worst performer on the MSCI World Index for the past two years. When the drop in crude to a 12-year low convinced some investors that Shell was paying too much for BG, Van Beurden pressed on, reiterating the appeal of high-margin assets from Australia to Brazil. More than 65 percent of analysts who cover Europe’s largest oil producer recommend buying the stock, the highest share among its peers. Shell’s shares will rise about 12.2 percent in the next 12 months, the most among the world’s six biggest non-state oil companies, according to the target prices of analysts compiled by Bloomberg. Analysts are rewarding the chief executive officer by putting the enlarged company in pole position to exploit a market upturn. Skip Menuīen Van Beurden staked his reputation on Royal Dutch Shell Plc’s $53 billion acquisition of BG Group Plc as crude slumped. Copy link A decentered black square over a white square. WhatsApp Messenger An icon of the Whatsapp messenger app logo.
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