Shell PLC (LSE:SHEL, NYSE:SHEL) left City analysts underwhelmed with its fourth quarter production update on 8 January, with lower LNG earnings and trading income’ significantly down’.
While the share price has moved up since that is more to do with the rally in crude prices generally than any great enthusiasm for the oil and gas giant following the update.
Next week sees the full final quarter numbers alongside the results for the whole of 2024 with cash flow and how much it will hand back likely to feature heavily.
UBS argues Shell’s share buyback programme is the most secure in the sector due to a low breakeven oil price of $36 per barrel and a strong balance sheet with net debt at just 14% of capital employed.,
Shell is not expected to scale back buybacks even if oil prices decline significantly.
UBS also sees potential for $6 billion in cost savings, which would lift medium-term earnings forecasts by approximately 2%.
The Anglo-Dutch giant is already on track to achieve its $2-3 billion cost-cutting target by 2025, and UBS anticipates further savings could be announced at the company’s Capital Markets Day on March 25.
Wael Swann’s overhaul of senior management to modernise its executive committee is also continuing, with 30-year veteran Huibert Vigeveno standing down as Director, Downstream, Renewables and Energy Solutions to be replaced by Machteld de Haan.
UBS estimates that closing just some of the ratings gap with its US rivals could unlock an additional $112 billion in value, equivalent to 1,500p per share.