Patience Rewarded At Royal Dutch Shell But Concerns Remain Over Speed Of Green Transition

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Patience Rewarded At Royal Dutch Shell But Concerns Remain Over Speed Of Green Transition
yenitammyenitamm / Pixabay

“Patience has been the name of the game for Royal Dutch Shell Plc (LON:RDSA) (LON:RDSB) investors who have been forced to watch and wait as the energy giant has been undergoing a painful green metamorphosis while grappling with the price shock of the pandemic. That stoicism, was sorely tested, but is now being rewarded with a slap on the back of rising returns, with $2 billion of share buybacks and an increase in the dividend to 24 cents a share.

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Q2 2021 hedge fund letters, conferences and more

Royal Dutch Shell Is Back In A Position Of Strength

The jump in oil and gas prices pushed up adjusted profits to $5.53 billion, beating expectations and putting Shell back in a position of strength, following the plunge in earnings to $638 million a year ago and the scrapping of the dividend.

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There will be questions raised about whether the pay outs planned are far too generous given the scale of the mountain Shell still has to climb to reduce its carbon emissions. Although Shell says it will now move to the second phase of allocating capital to power its transition strategy, these results are likely to lead to fresh calls to accelerate its move to renewables. Already Shell has been ordered by a court in The Hague to intensify its efforts in a case brought by climate campaigners, and that round of legal action is unlikely to be the last to hit the big energy giants.

Shell is trying to be leaner and more efficient by shedding operational costs. The higher cash flow from operations flooding in is helping reduce net debt, which fell by 5.5% over the quarter. But a debt pile of $65.7 billion is still a millstone at a time of costly energy transition.

So Shell still has a tough time ahead, it needs higher oil prices to be sustained to keep on the front foot, and it could also be tripped up as its comes under increasing pressure to step up its renewable shift."

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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