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Royal Dutch Shell plc Message Board

  • retiredguru3 retiredguru3 Apr 3, 2013 3:57 PM Flag

    RDS Profitability

    I tried a couple of times to post the url to an article...but apparently yahoo rejects that.
    The article agrees with my analysis of why RDS stock price is lagging CVX and others...

    If interested in reading the article, google "Royal Dutch Shell: A Look At Profitability" - it is a Seeking Alpha article from April 2, 2013.

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    • "the company has not been very successful in increasing reserves".....yes. but worse, the company has not been able to replace reserves based on current production. the projections were at something like 85% reserve replacement over the next 3 years. investors choke on that metric. a strong effective M&A using that prolific cash stash was missed to increase the reserve base. Rules on reserve recognition relating to shale oil and shale gas also contribute.

    • i might follow with one more point. Shell US management E&P has got a lot of o&g engineers in senior management. They answer to the Brits for funding, but their recommendations tend to drill first, ask questions later if there a dollar to spend. What was needed during the natgas lull was not these type - we needed financial managers with savvy for acquisitions and investment. Not the drill-drill lease-lease that has created the current quagmire. I mean, we could invested in Chick Fillet, or whatever it is called, and made much more, right from the start. It is the business - grease.

    • It can be condensed. Natgas was $13 June 2008. It was $3 July 2009. It slithered to $2 the early part of 2012. Smart execs everywhere were planning on shipping out to Pandora, hatching multi-billion dollar multi-year plans in............2008. For Shell, call it $65b spent on New York Yankess that could not hit in 2009,2010,2011 & 2012. With everyone drilling like mad, where would you expect gas to go? Group think. Think of it in terms of everyone buying into an overheated market and expecting miracles. Natgas has most recently come back to around $4. North America was a deep ditch. It's just going to take time. It is not to say Shell will not pull a decent profit - just not as much as things could have been had they re-directed a lot bigger share of that $65b to acquisitions during the low period,

    • Wonder how the currency exchange rates are affecting this? We're comparing Domestic U.S. with European.

      • 1 Reply to turbo031
      • Exchange rates have a small impact (and they tend to vary over time around a mean). The major take away for why the stock price is lagging is that the company has not been very successful in increasing reserves. More than anything, the value of an O&G company is the amount of proven reserves that it has - period...all other measures are secondary (yes, they do have an impact but are secondary to the value of proven reserves)...RDS's reserves have been more-or-less flat for several years...and so has the stock price.

        My view only...

    • I read the article thks for pointing it out guru. Accordingly, what I got from it was the fact that 1) we are not as profitable as our peers simply because of diminished "proven reserves" but its a fairly good stock to own because 2) the dividend is greater than the peers that RDS was compared to. My overall feeling is that we're not going to derive any pure profit investing in RDS unless they become more successful in their "discoveries". Gosh, they've been trying haven't they?

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