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Despite Low Oil Prices, Royal Dutch Shell Is An Attractive Long-Term Investment

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Arie Goren

Summary

In my opinion, at the current price Royal Dutch Shell is an excellent long-term investment, first for the generous dividend yielding 8.2% and second for a significant price appreciation when oil prices recover. In my view, the combination with BG is a smart move by Shell, and the acquisition of BG is expected to grow Shell’s reserves and generate meaningful synergies. The merger will accelerate Shell’s worldwide leading position in LNG and deep water. The worldwide leading position in LNG of the combined company will contribute a substantial growth of the company. Global LNG demand is expected to continue to grow strongly. My calculations demonstrate that even in the case of continued low oil prices, Shell will continue to generate strong cash flow due to a significant increase from downstream. Moreover, Shell has a strong balance sheet and good valuation, and its stock is currently trading below book value.

Jan. 5, 2016 5:45 PM ET| About: Royal Dutch Shell plc (RDS.A), RDS.B

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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