viewRoyal Dutch Shell PLC

Shell is ‘ripe to deliver’ and 2017 is an inflection year - broker

JP Morgan analyst Christyan Malek says investors should buy Shell ahead of further capex cuts and free cash flow uplift.

Shell branded petrol pumps
Shell is set to bring on 200,000 barrels per day of additional production.

Royal Dutch Shell Plc’s (LON:RDSB) portfolio is ‘ripe to deliver’, according to JP Morgan, which rates the stock as ‘overweight’ and sees 2017 as an inflection year for the oil supermajor.

JP Morgan analyst Christyan Malek says investors should buy ahead of further capex cuts and free cash flow uplift.

In a note Malek said: “the recent Brazil field trip left us incrementally positive on scope to cut capex further in 2017-18 as economies of scale on cost improve and internal efficiencies take effect.

“The key pushback following our upgrade has been whether Shell can institutionalize a cultural shift towards capital discipline - we came away reassured that the ‘penny has dropped’ across the company.”

Malek also highlighted that dividend coverage is forecast to improve to 1.8 times by 2018, compared to 0.5 times in 2016. According to the analyst Shell’s delivery of high margin barrels in deepwater is key to unlocking free cash flow growth, with 200,000 barrels oil equivalent per day and capex drops of materially.

Significantly, he adds that the combination of lower capex and incremental barrels should see Shell’s cash break-even to US$45 from US$60 per barrel by 2020.

Quick facts: Royal Dutch Shell PLC

Price: 1116.8 GBX

Market: LSE
Market Cap: £87.19 billion

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events


The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...



Alpha Growth PLC using experienced team to start Alpha Growth and Income...

Alpha Growth PLC (LON: ALGW) CEO Gobind Sahney joined Steve Darling from Proactive to discuss the fund called Alpha Growth and Income fund or AGI. This funds prospective client are family offices, pension funds, and other institutions that still wish to receive some income but also want their...

1 day, 12 hours ago

2 min read