Royal Dutch Shell sits on an oil and gas throne higher than that of Exxon Mobil.

The oil supermajor has worldwide proved reserves of 13.2 billion barrels of oil equivalent. Operating in over 70 countries, Royal Dutch Shell pumps out 3.7 million barrels of crude oil, liquefied natural gas (LNG), natural gas, synthetic crude oil, and bitumen.

Among the company's many and varied operations, it boasts the world's deepest oil and gas project in the Gulf of Mexico, the world's largest offshore floating LNG production plant off the Australian coast, and the world's largest retail fuel network at over 43,000 stations.

Both RDSA and RDSB shares are traded in three stock exchange centers – London, Amsterdam, and New York.

Reasons to remain bullish on RDS

  • Dividend Yield – Very attractive indicative gross dividend yield of over 5%
  • Forecasted earnings yield – The shares are trading on an attractive forecasted earnings yield of 10% (2019E)
  • A leader in LNG – Shell is the largest non-state LNG player globally, with a total marketed volume in 2017 of 66mt, the equivalent to just under 25% market share
  • Higher gas prices in Asia and Europe reflect strong demand – in line with our assumptions of an improvement in global growth, we expect to see continued increase in demand for gas. We also expect the price of gas and crude to continue trading at similar (or higher levels). We are not projecting any major shocks to the price in the short to medium term
  • Expected increase in FCF – We expect FCF to be driven by higher LNG prices and then additional volumes. The integrated gas business is now what Shell terms a cash engine, with the focus of the business on delivering free cash flow growth and returns, and supporting the group’s cash flow priorities in the medium term – namely debt reduction, dividends and share repurchase
  • Expected reduction in debt burden – The biggest issue with RDS is its debt burden once it took over BG. However, we expect debt to come down as the Company continues to strengthen its free cash flow position.
  • Share Buyback – The Group has a share buyback program of over $25bn of share buyback between 2018-2020
  • Price target – our price target of 3168p is based on 16x 1.98 (2019E)


We expect RDS to continue to improve its performance in line with an improved economic environment and the price of oil & gas maintaining or improving from their current levels

Shell's commitment to its $25bn buyback programme to 2020 remains intact and with cash return yields over the coming three years should continue to increase. This at these levels, we continue to see material value in the shares.