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Royal Dutch Shell PLC ADR Class A RDS.A

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Shell Charts Its Own Course With Updated Energy Transition Strategy

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

After providing a glimpse last autumn, Shell has elaborated and expanded on its latest strategic plan to adapt to the energy transition and achieve its target of a net-zero portfolio by 2050. Like peers with similar targets and goals, Shell plans to grow its marketing retail operations and reduce oil production over time, but unlike peers, Shell refrained from offering an explicit renewable generation capacity target. Given the competitiveness of the segment and the potential for lower returns as more firms enter the segment, this is likely prudent. Instead it plans to focus more on the customer, which is where Shell believes the value will be in the energy transition, as opposed to the asset. Instead of producing large amounts of renewable power, it will work with customers who want to secure low-carbon solutions for their businesses. This will result in Shell producing some renewable power as well as expanding further into low-carbon fuels such as hydrogen and biofuels while leveraging its trading operations to secure additional supplies. Management believes participating along the entire low-carbon energy spectrum will prove difficult to replicate and produce a competitive advantage. It calls this solution power-as-a-service, looking to capitalize on the other “as-a-service” businesses the market is currently fond of.

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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 2019, it produced 2.0 million barrels of liquids and 11.4 billion cubic feet of natural gas per day. At year-end 2019, reserves stood at 11.1 billion barrels of oil equivalent (including equity companies), 37% 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 2.9 mmb/d located in the Americas, Asia, Africa, and Europe and sells 18 mtpa of chemicals. Its largest chemical plants, often integrated with its local refineries, are in Central Europe, China, Singapore, and North America.

Carel van Bylandtlaan 30
The Hague, 2596 HR, United Kingdom
T +31 703779111
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 83,000