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Posts on ‘February 28th, 2018’

Shell’s Negative Outlook On Oil Yields Positive Strategy For Company

: 28 FEB 2018

Summary

  • Shell’s long term vision of oil prices is rather negative, leading to moves to cut reliance on high-cost projects.
  • Natural gas on the other hand is seen as a growth industry for the longer term, which is why it invests in upstream, as well as downstream & LNG.
  • While I think Shell’s views on oil prices going forward is overly negative, I do think that prices will be volatile, so it is the right strategy.

Perhaps nothing highlights Shell’s (RDS.A) (NYSE:RDS.B) current leadership mindset more than its decision to sell its oil sands interests for net $7.25 billion last year. It is a mindset borne out of the belief at the top of this company’s leadership structure that there is a strong probability that oil prices will stay weak for perhaps decades to come, as demand destruction due to environmental concerns, as well as technological change will perhaps cause a peak in demand as soon as a decade from now. I personally do not share this view, yet as an investor in this company I am glad that it is making some of the structural changes that Shell is currently undertaking, because I do believe that it will transform it into one of the better energy companies out there. It will not only thrive during the good times, but it will also prove to be resilient during the bad. read more

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