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Shell upgraded to equal weight as Barclays says new framework addresses key concerns

The bank said the oil giant's framework set “clear priorities for dividend growth, debt reduction, additional shareholder returns and further growth”

Royal Dutch Shell PLC - Shell upgraded to equal weight as Barclays says new framework addresses key concerns

Royal Dutch Shell PLC (LON:RDSB) has been upgraded to ‘equal weight’ from ‘underweight’ by analysts at Barclays, who said the company’s new framework had addressed their “key concern” after the oil giant reinstated dividends in its results on Thursday.

In a note on Friday, the bank also reiterated its 1,500p target price on the FTSE 100 firm and said the framework set “clear priorities for dividend growth, debt reduction, additional shareholder returns and further growth”.

READ: Shell shares rise as investors welcome dividend increase

“On our own numbers we expect Shell to hit its new target net debt level [of US$65bn] in at the end of 2021 with the potential for US$2-6bn (2-7%) extra returns to shareholders per year beyond this”, Barclays said.

The bank added that the framework aligned with its own approach and “should help demonstrate the real strengths that Shell has in a lower carbon world”.

“We believe there is more to come from Shell strategically, but it is the combination of the establishment of a financial framework together with the potential cash generation we see that leads us to lift our rating to Equal Weight. We see close to 70% potential upside to our 1500p [price target]”, the bank added.

Shell’s new framework includes cutting 9,000 staff in order to reduce its debts while also cutting the number of refineries it owns to six from 14. The company also said oil may have reached its “high point” and its production was unlikely to recover from the effects of the coronavirus pandemic, which battered economies and sharply reduced demand for ‘black gold’.

Shares in Shell were up 1.5% at 911.8p in mid-morning trading.

Quick facts: Royal Dutch Shell PLC

Price: 1327.7876 GBX

LSE:RDSB
Market: LSE
Market Cap: £103.65 billion
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