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Adjusted earnings came in at $638 million, with $6.5 billion in cash flow from operations and $243 million of free cash-flow. Return on Average Capital Employed (ROACE) came in at 5.3%, while gearing is now at 32.7%. Total dividends distributed to Royal Dutch Shell plc shareholders in the quarter were $1.2 billion. An interim Q2 dividend of US$ 0.16 per A ordinary share and B ordinary share was declared.
Royal Dutch Shell Chief Executive Officer, Ben van Beurden said that Shell “has delivered resilient cash flow in a remarkably challenging environment.”
“We continue to focus on safe and reliable operations and our decisive cash preservation measures will underpin the strengthening of our balance sheet.”
He added that a number of new working practices had “accelerated digitalisation across the company”..while the oil giant’s high-quality integrated portfolio, disciplined execution and forward-looking strategy “enable sustained competitive free cash flow generation.”
Chart and Technicals
RDSB shares suffered a precipitous COVID driven fall in February / March 2020, briefly touching below £9 per share – a 30+ year low. The stock recovered the 50-day moving average at the start of April, and intermittently held that level until late June. Given the stock is trading at these historic lows, if Shell recovers and holds the 50-day moving average, currently at 1264p, our next target will be the gently falling benchmark 200-day moving average, currently at 1,725p.
Summary and Atlantic View
A darling of the FTSE100, and up to recently, a cornerstone investment among leading fund managers, the COVID crisis has seen Shell battling a seemingly existential crisis on a par with the challenges face by the venerable oil giant during WWII. However, the company has delivered a remarkably resilient performance during the depths of the crisis, and as CEO Ben van Beurden said in his Q2 results statement video clip, cash preservation (£1.1bn reduction in opex), streamlining and digitalisation have all been prioritised during the quarter, and these will in turn enable sustained competitive free cash flow generation going forward. As travel and movement starts to pick up on the back of expectations of vaccines and effective testing measures for COVID, it is reasonable to expect that energy and resource companies will start to return to some semblance of normality. Historically Q3 has been a strong earnings quarter for Shell, and with the measures management have already taken to streamline the company, Atlantic Capital Markets are backing Shell as a recovery play, firstly to regain the moving 50-day level at 1264p, and shooting for the 200-day benchmark by the end of the year. There is the added dividend bonus to boot, and although the payout was cut from 47 cents to 16 cents in Q1, (same for Q2), investors can still pick up the stock and collect the Q2 payout before the August 13 ex-dividend deadline. Atlantic Rating: Buy.
Alan Green talks to John Woolfitt, Director at multi award winning broking and investment firm Atlantic Capital Markets. John looks forward to the coming month, and discusses US job numbers, Boris and Build Build Build, and the raft of UK job cuts. He then discusses ‘Covid’ stocks, including Novacyt #NCYT, upcoming key corporate announcements for July, including Royal Dutch Shell #RDSB and Hutchison China Meditech #HCM and trading ideas from the Atlantic dealing floor. John finishes with a recap on key points and trading ideas to help traders and investors in July.
Alan Green & Sarah Lowther discuss the market crash, lessons from China, plus an array of stocks including Tiziana Life #TILS & Open Orphan #ORPH on the Total Market Solutions podcast
Alan Green Joins Sarah Lowther To Talk All Things Markets
During this weekend podcast, and in the wake of a colossal fall, we look at markets which ended the week on Friday the 13th, so far we’ve witnessed an emergency rate cut by the bank of England as the FTSE had its worst day in 33yrs.
Alan Green shares some insight on the most recent events surrounding Corona Virus, as he extrapolates what he can from the lessons in China, the initiative adopted by the UK plus an array of market opportunities, on the assumption one assumes a strong stomach and constitution toward volatility!
Stocks covered include #AZN #GSK #TILS #ORPH #RDSB #TSCO #SBRY #OCDO #JDW
Oil play, 5.5% yield (income paid quarterly),8% discount to assets, BREXIT currency hedge..what more do you want?
Black Rock Commodities Income Investment Trust –ISIN GB00B0N8MF98-BRCI
Oil remains one of the strongest major commodities this year and despite recent exemptions from Iranian sanctions, looks likely to stay well supported.
The major companies themselves Royal Dutch #RDSB, BP #BP, Total, Eni, Norsk Hydro etc have been major beneficiaries of the stronger spot price and, with greater capital discipline, have rebuilt balance sheets and engaged in shareholder friendly actions whether dividend increases or share buy-backs.
One way of accessing this sector is through the Black Rock Commodities Income Investment Trust.
The object of this investment trust is to achieve an annual dividend target, (currently 4p), and over the long term, capital growth, by investing primarily in securities of companies operating in the mining and energy sector.
- The fund predominantly invests in large quoted equities, the split between oil and mining being approximately oil, majors plus exploration/production 42%, and mining 56%, as at end September 2018.
- Underlying major mining companies, have for the large part responded to the historic weaker trend in resource prices, maintaining balance sheet discipline and adjusting their cost bases. There have been some examples of spectacular self-help stories e.g. Glencore and Anglo-American Mining.
- Recent mining conferences have highlighted the need for increased use of Lithium, Cobalt, Nickel and Copper relating to Electronic Vehicles.BRCI has been building exposure to these elements over the last couple of years. For example, Glencore (5.2% of assets) is now one of the leading global suppliers of Cobalt, a vital component for rechargeable batteries.
- Rising economic growth projections, supply constraints and a changing OPEC stance have significantly helped the prospects of the major oil companies held. Royal Dutch and BP have both recently announced good third quarter figures and both have annual dividend yields near 6%. Statoil and Total also confirmed the more favourable trend for oil majors.
- As at End September 2018, the Fund ‘s major holdings featured BHP (8.9%), Royal Dutch (6.7%) Rio Tinto (6.2%), First Quantum (5.7%), Glencore (5.2%), Exxon (4.2%), and Teck Resources (4. 5%). The top ten holdings represented over 55% of the total portfolio, a relatively concentrated stance.
- The global nature of these companies provides exposure to non-sterling currencies, especially the US dollar. This can benefit both capital and income when sterling is on a weaker trend. In this regard, the instrument may be seen partially as a no-deal BREXIT hedge.
- On a TECHNICAL NOTE, it should be noted that energy and material stocks represent about 27% and 24% of the FTSE100 index and the FT All-Share index respectively. If using these as benchmarks, the weighting in these sectors can materially affect the relative performance of UK active and passive funds.
- As well as targeting financially strong dividend paying equities the company also employs option writing strategies and an element of gearing, currently near 10%, to further improve the sources of income.
- On an annual yield, over 5.5%, (payable quarterly), this trust represents a high-income longer-term value play, but investors should be aware of the volatility of the underlying sector-maybe another reason to adopt a pooled approach. The trust currently trades at a current discount to net assets of near 8%, near the ten year’s low, compared with the premium on which it traded for most 2008-2016 period (see graph below). The company operates a discount management procedure from time to time.
Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.
Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.
Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.
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