The major integrated oil & gas sector is now on special offer. Companies are trading at some of the lowest valuations in the last 50 years and the sector appears too hard to pass up for any value investor.

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Having said that, company returns on equity and assets are the lowest that they have been at any point during the past decade. Nonetheless, the oil majors still support extremely clean balance sheets with plenty of room for borrowing to buy up growth. Indeed, with many oil-bearing regions such as Kurdistan and the Bakken ruled over by relatively small independent operators, big oil has plenty of opportunity to buy growth.

One of the best looking opportunities right now is Anglo-British Company, Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B) originally started its life as an import-export company supplying sea shells to wealthy investors in London. The company has since transformed itself into the world’s third largest international oil and gas company.

Shell’s reserves totaled 32.5 billion barrels of oil at the end of 2012, which is enough for 26 years of production at current rates. Moreover, the company currently has 30 exploration projects underway that are expected to unlock 7 billion addition barrels of oil reserves. So, the company’s long term production is almost guaranteed.

However, the most attractive part of the company is its current valuation and dividend yield.

Shell is trading at a 51% discount to its 10-yr average

Currently, Shell’s dividend yield stands at 5.1%, greater than its larger peers, Exxon Mobil Corporation (NYSE:XOM) and Chevron. In addition, the company’s price to book ratio stands at 1.1, lower than the ratios of Exxon and Chevron Corporation (NYSE:CVX) once again, which themselves are trading at a 47% and 42% discount to their 10-yr average price-to-book ratios – Shell itself is trading at a 51% discount to its 10-yr average. Exxon’s current P/B ratio is 2.4 and Chevron’s is 1.6.

Furthermore, on a price-to-sales ratio, Shell currently trades at ratio of 0.4 compared to a historic, 10-yr sector average of 0.8.

Shell’s dividend payout is virtually guaranteed, why, because the company has been paying and raising its dividend every year since the end of the Second World War, which by any standards is an impressive record. Additionally, the dividend looks to amply covered by free cash flow. The cumulative dividend payout was covered twice by free cash flow during the first half of this year.

Unfortunately, while the dividend payout looks secure and the company trades at the lowest valuation seen this decade, much is left to be desired when it comes to the company’s projected growth for the next few years.

Shell’s EPS will stagnate over the next two years

Consensus Wall Street estimates predict that Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B)’s EPS will stagnate over the next two years. However, the company’s management has presented a different, more positive view, predicting that five major projects coming online over the next 18 months will add $4 billion to the company’s operating cash flow by 2015 – that’s a 10% rise in operating cash flow from 2012 levels.

Shell’s outlook is cloudy

So, Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B)’s outlook is cloudy but one thing is for sure, the third largest oil company in the world is currently trading at a rock bottom valuation. What’s more, the firm’s dividend yield is 150% greater than the S&P 500 average of 2% and this payout is covered twice by free cash flow.

In the generally depressed international oil and gas sector, Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B) appears to be the most undervalued and attractive investment to make.