Shell’s analyst rating
Royal Dutch Shell’s (RDS.A) analyst ratings show that 69% of analysts covering the stock rate it a “buy.” Around 23% rate it a “hold.” The highest 12-month price target for Shell stands at $73, indicating a 59% gain from current levels. However, 7% of analysts tracking Shell rate it a “sell.” Still, the lowest price target, at $57, implies a 24% gain. The average 12-month price target stands at $64, indicating a 40% rise from current levels.
Chevron (CVX), Exxon Mobil (XOM), and BP (BP) have been rated a “buy” by 52%, 31%, and 43% of analysts, respectively. If you’re looking for exposure to the overall energy sector, you can consider the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). XOP has a 6% exposure to integrated energy, a 20% exposure to refining and marketing, and a 74% exposure to the oil and gas exploration and production sector.
Shell is restructuring its business portfolio
Taking low oil prices into consideration, Shell is restructuring its business portfolio by retaining only competitive projects. Many projects have been delayed, rephased, or canceled. It’s halting the Carmon Creek project in Canada, stopping offshore Alaskan exploration, and canceling the sale of downstream assets in Norway.
Shell is also focusing on cost optimization by cutting overhead across the supply chain and downsizing its workforce. In the first nine months of 2015, Shell has reduced its operating cost by 11% and downsized its workforce by 7,500.
Shell was on track to achieve its $30 billion yearly capex (capital expenditure) target in 2015. For 2016, the Shell-BG combined capex is expected to be around $35 billion. The Shell-BG merger is expected to close in early 2016. The merged entity is expected to gain from the creation of synergies to the tune of $2.5–$3.5 billion.
According to Shell’s management, “BG rejuvenates Shell’s upstream by adding deep water and integrated gas positions that offer attractive returns and cash flow, with growth potential.” Management went on to say, “Shell is becoming a company that is more focused on its core strengths, a company that is more resilient and competitive at all points in the oil price cycle and that has a more predictable project development pipeline.”