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Shell Takes A Shell-Acking After Earnings, Was It Justified?

Aug. 5, 2018 8:37 AM ET

Summary

  • Shell daily production dipped slightly in Q-2, causing a miss of EPS by 0.15 share.
  • Investors were not impressed and discarded the stock in droves.
  • In late May it reached an all time high stock price. It has since back-tracked about 10% and we are dipping our toes in at present levels.
  • Shell has been transforming it’s business model in recent years, and may now deserve a higher multiple.
  • Further, the 25 billion dollar stock buy back will tend to put upward pressure on the share prices.

Introduction

We were a little shocked at Shell’s, (RDS.A,RDS.B) decline on it’s Q-2 earnings release. Any serious review of operations could have foretold it. When you sell off $30 bn worth of assets that produce oil, you’re going to see a decline of this type. I mean seriously, we’re talking about 40K BOPD essentially on a company that produces over 3.5mm BOPD.

Perhaps large investors were wondering if the company is allocating capital in sufficient amounts to maintain and grow production. When we look we see that the company has been investing at a consistent rate to maintain production longer term.

FULL ARTICLE

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