The Investment Column: Shell

THE OIL giant Royal Dutch/Shell turned in a slick performance in a declining market yesterday with an upbeat presentation to analysts and fund managers.

In a market that fell almost a 70 points yesterday, Shell rose 25.5p to 499.5p.

Shell said an an upbeat trading statement that it is meeting all its targets in its savage cost-cutting and disposals programme. Over the last year, since it announced its restructuring plans, crude oil prices have more than doubled and the company is now recovering its reputation among investors.

It had been slow to realise the need for radical change compared with its nimbler rivals BP Amoco and Exxon Mobil, which cut costs and then hit the acquisitions trail.

It is playing catch-up and on yesterday's evidence it is progressing well. Some two-thirds of the work in its restructuring is now done, Shell said yesterday.

Total proceeds from disposals will be $12bn (pounds 7bn) by 2001 and 18 per cent of the workforce will be cut by that year leading to at total of 18,000 job losses.

But what really excited the market yesterday were a couple of nice surprises pulled out of the bag.

The target for year-on-year savings by 2001 was raised from $2.5bn to $4bn. Shell also flagged up a plan to return capital to shareholders. It said it was considering a "multi-year" share buyback.

This is currently made unappealing by Dutch tax law and Shell would have to persuade the government there that change is necessary. That process is in train and the company is sounding confident that a solution can be achieved. BP Amoco has already said that it expects to buy back shares next year.

Shell maintained its conservative target for 2001 of 14 per cent for return on average capital employed (ROACE), but analysts fully expect the company to surpass that.

Consensus forecasts for the full year are for profits of pounds 1.8bn, which puts the shares on a foward multiple of 27.

This is a 20-25 per cent discount to BP Amoco and there must be a good chance it will close that gap. With surging crude oil prices and Shell's good spread of assets, analysts are talking about 600p a share. Buy.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Beverley James: Accounts Payable

£22,000 - £23,000: Beverley James: Are you looking for the opportunity to work...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower