Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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"Your artificially high comment might be right but we are using a lot of oil so dont quite agree on that.."
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NSS, it wasn't my comment that OP is being kept 'articifially' high, was someone else on here. I was just repeating what they said (I should have quoted them...sorry about that).
Not sure what you mean by "quite a lot of oil". Is 'quite a lot' enough for SHell to reach profitability and hopefully increase shareholder payments?
I believe that demand is well below where it was at start of 2020 and also below pre-covid forecasts. But 'apparently' demand is showing signs of increasing and OPEC+ have increased the production their members are 'allowed' to pump. So things are improving for oil producers. Whether we will reach pre-covid levels - or even get a bit of an economic short term boom - is $ million question!
Your artificially high comment might be right but we are using a lot of oil so dont quite agree on that..
These companies basicially have to create a new business model as their product is no longer needed in the very long term and there are long lead in times etc...
The question is which should be the major project in the long term to nail their colours to. Currently its a bit scatter gun with a foot in all camps. One thing I guess when it all settles down their will be less risk with these companies.
Could still be a great investment certainly short term....
OPEC+ seems to be keeping the OP high enough ('artificially'...I thought mononpolies were illegal?!) to make producing 'profitable'....it is just the demand that is needed square the circle.
But only last year Russia fell out with OPEC and the OP tanked. So could that happen again.
The real test for OPEC+ will be when/if green technologies start to reduce the demand for oil significantly. Then the producers like Russia - who are struggling under US sanctions - will demand a bigger slice of the OPEC+ pie - until it breaks the concensus. AT some point supply will significantly outstrip demand.....and at the same time the oil producing countries will be needing more cash to transition to a green future.
Hopefully companies like SHell can raise enough cash reserves to fund a realistic green transition whilst oil assets fetch a good price.
SENSITIVITY TO OIL PRICES
We estimate that a $10 per barrel change in oil prices would have an impact of roughly $6 billion per year on our cash flow from operations.
Of this, $4 billion would come from Upstream and $2 billion from our Integrated Gas business.
Cash flows from our Growth pillar and Chemicals and Products businesses have limited exposure to commodity prices and so are not included in this calculation. This is an indicative estimate and not a prediction.
Based on this assumption, if the oil price sustainably increased by around $15 per barrel, as it did in January and February 2021, that would be expected to create an additional $9 billion in medium-term cash flow per year from operations from our Upstream and Integrated Gas businesses.
Similarly, a $15 fall in the oil price would be expected to result in a $9 billion reduction in cash flow from operations per year in the medium term
https://www.shell.com/promos/energy-and-innovation/shell-energy-transition-strategy/_jcr_content.stream/1618407326759/7c3d5b317351891d2383b3e9f1e511997e516639/shell-energy-transition-strategy-2021.pdf
Boyobach
I think that what happens to SP from here though obviously having some relationship to OP will depend on RDSB paying down its debt, getting buy in to its transition strategy but most of all being in a position to implement a progressive rise in dividend to a point where yield will start to attract the arbitrageurs and underpin a move out of the current range. Clearly given the significant rise in Brent, the weakness in response of the SP does seem to make the prospect of short term uptick look unlikely as other than some comfort might be taken from the US data much will be made of the potential for optimism to be of short duration should any number negative factors occur. In other words I don’t have a bloody clue where the share price will be in the short term and what effect the Q1 Freeport will have on it! GLA :-)
The fact that a trend has developed is no guarantee that it will continue, so it is of very limited use as a predictive tool - it just indicates the sort of path you might reasonably expect if things continue as they are. To that extent, trends are much more useful as detectors of change because when the price heads in a new direction it necessarily breaks out of an existing trend. Yesterday’s jump in OP, due to an inventory drop reported by the EIA, fortuitously nudged RDS into a tram-line trend that it was almost falling out of before it was even established. So whether it will last is very speculative, although RDS is still very weak relative to OP, so there’s plenty of headroom:
https://invst.ly/uhbik
It’ll be nice if it becomes established because it suggests a 30 to 40p per month rise in the sp range could be on the cards..
https://www.rigzone.com/news/wire/oil_up_after_iea_brightens_outlook-14-apr-2021-165153-article/
Hmmm last half hour Brent contract has pushed through $66 to $66.26 and even RDSB has managed to rise over 30p from a low base. Dow is crashing through records and I think just maybe there’s a feeling demand for oil may now start to underpin and supersede OPEC+ production controls
Time will tell but SP will only recover to anywhere near historic levels as RDSB regains the ability to raise its dividend yield while balancing g other considerations such as debt repayment and capital expenditure in transition markets IMHO DYOR GLA