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Royal Dutch Shell PLC ADR Class A RDS.A

Morningstar Rating
Rating as of

Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Downgrading Shell’s Moat and Reducing Our Fair Value Estimate in Part on Strategic Uncertainty

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

We have downgraded Shell’s economic moat rating to none from narrow as our forecast for excess returns has become too low while the company’s future uncertainty is too high to award a moat. The downgrade of the moat rating might appear to be a quick reversal from our upgrade to narrow a few years ago. At the time, integrated oils, including Shell, had made significant headway in reducing operating costs in their existing production base and capital intensity of new projects so we forecast they could earn adequate excess returns at our midcycle price assumption of $60/bbl.

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Company Profile

Business Description

Royal Dutch Shell is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2020, it produced 1.8 million barrels of liquids and 9.2 billion cubic feet of natural gas per day. At year-end 2019, reserves stood at 9.0 billion barrels of oil equivalent, 52% of which consisted of liquids. Its production and reserves are in Europe, Asia, Oceania, Africa, and North and South America. The company operates refineries with capacity of 2.8 mmb/d located in the Americas, Asia, Africa, and Europe and sells 15 mtpa of chemicals. Its largest chemical plants, often integrated with its local refineries, are in Central Europe, China, Singapore, and North America.

Contact
Carel van Bylandtlaan 30
The Hague, 2596 HR, Netherlands
T +31 703779111
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type —
Employees 87,000

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