RE: Dismal RDS23 Aug 2020 00:05
Do you mean £9? By way of a reality check, here’s a straight comparison between RDS, BP, Brent, NG and FTSE100 over the last two years:
https://invst.ly/rw5oj
Although not shown, Chevron fell by about 30%, half as much percentage-wise as RDS’ near 60% over the same period. Others here have suggested that US companies may not provide a fair comparison with European based companies. Perhaps the picture for US oil companies will change if Biden gets the Presidency - although Corporate Dems are not greatly removed from moderate Republicans in reality.
It is fairly clear from this chart that, correctly or not, the market was pricing RDS and BP fairly tightly up until April 29th (marked) - the date of RDS’ Q1 report and dividend-cut announcement. Up to that point, RDS’ sp was running at about 4.6x that of BP. This was uncannily close to the ratio of their annual dividends at the time - surely too simplistic a link for the market? Let’s hope so, otherwise the RDS sp is due to drop to around 3x BP, putting it at below £8.50!
Is BP actually outperforming RDS by the kind of margin that the current market prices imply? BP’s sp is now lower than it was in the aftermath of Deepwater Horizon in 2010 - from where it never fully recovered in terms of catching back up with RDS although the gap is now much narrower: https://invst.ly/rw92f
‘It is what it is’ and may even get worse for RDS. So what is the long term outlook? The historic investor assumption has always been that RDS is a ‘safe pair of hands’ (hence ‘Never Sell Shell’) and we know with certainty that energy - fossil based or not - is a key economic driver going forward. So the first priority for RDS is to ensure they have the right strategy and team to deliver on that fundamental change, the second is to convince investors that they have a credible and deliverable plan to navigate through the transition. Have they done that yet?
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