logo-loader
viewRoyal Dutch Shell Plc

Barclays says Shell shares are undervalued and 2017 will be a ‘year of delivery’

“Overall with significant progress on divestments already made it appears that Shell has reached the critical path of seeing gearing fall,” he said.

Shell tanker at petrol station
Barclays has an ‘overweight’ rating for Shell, with a £27.50 price target.

Royal Dutch Shell Plc (LON:RDSB) is in a vastly different position to a year ago, but, it is clear that the oil supermajor’s work is not over, so says Barclays.

“The integration with BG is complete and the combined group provides a competitive base from which it should be able to reset and simplify the business,” Barclays analyst Lydia Rainforth said.

“The 2016 annual report provided some positive encouragement too with unit opex down 20% and upstream productivity levels now back to 2010 levels.”

At the same time, however, the analyst also points out that Shell lost money in its upstream operations for the second consecutive year, and production costs are still materially higher than when Brent last averaged in the US$50s (back in 2005).

Nonetheless, Rainforth reckons at the current price of £22.21 the company’s shares are undervalue and says that 2017 will be a ‘year of delivery’.

“Overall with significant progress on divestments already made it appears that Shell has reached the critical path of seeing gearing fall,” he said.

“This should increase market conviction that the dividend is sustainable, in which case a share price that implies a yield of nearly 7% appears to us meaningfully undervalued.”

Barclays has an ‘overweight’ rating for Shell, with a £27.50 price target.

Quick facts: Royal Dutch Shell Plc

Price: 2162.0086 GBX

LSE:RDSB
Market: LSE
Market Cap: £171.06 billion
Follow

Add related topics to MyProactive

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

NO INVESTMENT ADVICE

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...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Reward Minerals has environmental approval for Lake...

Reward Minerals Ltd (ASX:RWD) chief executive Greg Cochran updates Proactive on Western Australia’s EPA recommending environmental approval for the company’s Lake Disappointment advanced stage sulphate of potash (SOP) project. Cochran said it was welcome news for all project stakeholders who...

6 hours, 1 minute ago

RNS

Transaction in Own Shares

18 hours, 14 minutes ago

Transaction in Own Shares

1 day, 18 hours ago

Transaction in Own Shares

4 days, 17 hours ago

Transaction in Own Shares

5 days, 18 hours ago

Transaction in Own Shares

6 days, 18 hours ago

Transaction in Own Shares

1 week, 1 day ago

2 min read