The Motley Fool: 3 big questions hanging over Royal Dutch Shell plc
By The Motley Fool Feb 14, 2017
A stagnating oil price has seen investor appetite for Royal Dutch Shell(LSE: RDSB) seep away from recent multi-year highs.
The crude colossus saw its share price strike its highest since November 2014 a month ago, but fresh fundamental fears have seen Shell — like many of its London-quoted peers — retrace more recently.
Shale producers returning
Arguably the biggest driver behind Shell’s decline has been a steady build in the US rig count.
With drillers across the Atlantic becoming ever-more-comfortable with oil prices anchored around the $50 per barrel mark, the number of units in operation has been steadily increasing since the autumn.
Indeed, latest Baker Hughes numbers showed the total rig count rise to 591, up eight week-on-week and representing another fresh high since October 2015. And the EIA expects US production to power steadily higher as the country’s oilies return to work — aggregated output of 8.9m barrels in 2016 is expected to rise to 9m this year before powering to 9.5m in 2018, the body said.
OPEC deal ineffective?
And signs of increasing Stateside production is likely to put stress on OPEC keeping the taps switched down after the six-month Doha deal expires in June.
Saudi Arabia has been forced to absorb bigger-than-planned supply reductions to make the accord work, with major producers like Iran, Nigeria and Libya being exempted from taking part and other cartel nations failing to cut as much as required.
While the IEA noted last week that 90% of the pledged oil output reduction has been observed, Iraq has slashed production by less than half of what it pledged to back in November, while other major member Venezuela is also failing to meet its agreed quota by some distance.
The news will hardly go down well with those nations meeting or even exceeding their allocated quotas given the huge economic and political considerations at play. And with production rising in the US, as well as in other non-OPEC countries like Canada and Brazil, the chances of a deal extension being drawn up stand at around slim-to-none.
Spending slows
Aside from hopes of the oil market being rebalanced later this year, as initially targeted, the scale of spending reductions by Shell casts doubt on when — or indeed if — the business will re-emerge as the earnings powerhouse of yesteryear.
The business forked out $26.9bn in organic capital investment in 2016, down $20bn from what it and the now-integrated BG Group spent in 2014 combined. And the total is expected to fall again, to $25bn, in the current year.
And Shell also has to secure tens of billions of dollars more of divestments over the next few years to soothe the stress on its balance sheet. It is certainly true that the BG acquisition has given a huge boost to the company’s reserve base, but fears still abound that swingeing sales and budget cuts elsewhere could undermine long-term profits growth at the group as exploration activity falls.
Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
