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Shell: Regaining Dividend Respectability And Shifting Toward Green Hydrogen

Shell: Regaining Dividend Respectability And Shifting Toward Green Hydrogen

The Daily Drilling Report: 10 November 2020

  • Shell is taking a healthy approach toward energy transition and balancing capital projects in terms of energy source.
  • It’s also forging a leadership position in two key fuels that have been identified as being crucial to meeting Paris Climate goals – natural gas and hydrogen.
  • Shell is back in our good grades with its recent dividend raise and strong earnings prospects going forward.
  • At its recent price in the mid-$20s it represents a nice risk reward profile.

The question is, is the dividend safe? The answer here is yes, as it has just been raised. It seems Uncle Ben has heard the hue and cry of outraged shareholders, and is restoring some of what he took away just last quarter.

Ben Van Beurden, CEO Shell:

So we are announcing an increase of 4% in our dividends this quarter. But we’re also announcing a target milestone for our net debt of $65 billion for the near term. And once we have achieved this milestone, we target to further increase shareholder distribution. So we are not offering the promise of future growth, but also increasing shareholder distributions for the near term.


Now let’s be honest, Shell has been a troubled company. You don’t lose 60%-70% of your capitalization in less than a year if everything is hunky dory, right? And, being European Shell has to some degree lost its bearings in the Paris Climate Hullaballoo, and like that fictional little girl Alice has fallen down a “rabbit hole” in search of the Wonderland of “Green Energy” profits.

Shell is rich in gas thanks to the much-maligned BG purchase that ran all this debt up. As noted natural gas also is a source fuel for blue hydrogen, and one route to the carbon neutrality that all big oil players aspire to these days.

Gas will be Shell’s key to profits going forward. It’s also chasing a lot of green energy projects, and in the next section we will discuss one of them designed to deliver green hydrogen offshore The Netherlands.

Shell, green hydrogen and wind farms

The Groningen gas field, discovered in 1959, has been a mainstay of Shell until the last few years where earth subsidence and earthquakes led the Dutch government and key operators to begin a rapid phase-down of extraction. As you may know from history class, the Dutch are particularly sensitive to sea level issues vis a vis land sinking below the sea. Now through the planned development of the NortH2 project this giant field may soon take on another role. We will take a deeper look at the fundamentals of this planning stage level project later on.


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