Shell PLC
Energy
Global
Investment summary

Shell is a global vertically integrated energy and petrochemical company operating in more than 70 countries. The company operates in the following segments: Integrated Gas , Upstream , Marketing (including Mobility, Lubricants, Sectors& Decarbonisation), Chemicals and Products, Renewables and Energy solutions. LNG sales volumes were 66.0 million tonnes in 2022 compared with 64.2 million tonnes in 2021.  Shell is the leading LNG supplier globally. Shell operates 105k EV charge points. Shell is focusing on investments in renewables and gas, targeting zero emissions by 2050.

Details
Ticker
SHEL.L
Trading currency
GBp
Last close price, (currency)
2,438.0
Common shares outstanding
7,003,503,390
Preferred shares
MktCap, (currency) mn
205,136
Target price
Current opinion
Description

Shell, formerly The Royal Dutch Shell, is an international energy and petrochemical company. It is engaged in the exploration, production, refining, and marketing of oil, natural gas, chemical products, and LNG. The company operates in several segments: Integrated Gas, Upstream, Marketing, Chemicals and Products, Renewables and Energy Solutions, and Corporate. The Integrated Gas segment includes liquefied natural gas and the conversion of natural gas into gas-to-liquid fuels. The Upstream segment includes the exploration and production of crude oil, natural gas, and NGL. The Marketing segment comprises the Mobility, Lubricants, and Sectors and Decarbonisation businesses. The company operates oil refineries and produces chemicals using its own feedstock. The Renewables and Energy Solutions segment include Shell’s Integrated Power activities.

Industry view (TAM)

The global energy market remains under the influence of the Ukraine-Russia conflict resulting in a reduced supply of Russian gas and oil to Europe; Chinese lockdowns doe to COVID; increasing inflation; and a strong US dollar. World oil demand is now forecast at 101.8mb/d in 2023, according to IEA. Crude oil product deliveries to the US, UK, EU, Japan, and South Korea were cut by 2.2mb/d since the beginning of the war, with two-thirds of volumes rerouted to other markets. The LNG demand is forecast to reach 700mt by 2040 vs 360 in 2020. The Ukraine-Russia war may accelerate the LNG demand growth, in particular in the EU.

Pros
  1. Royal Dutch Shell is a global oil and gas major with a vertically integrated product range and wide geographical operations
  2. Shell is one of the leading global LNG operators, presented in rapidly growing Asian and European markets
  3. Shell has a large pipeline of renewable projects, targeting the transition towards a zero-emission economy by 2050
  4. The company improved its financial position to provide a sustainable capex for future development and for shareholder payouts
  5. Shell operates globally and presents in key growing markets as a producer and retailer, getting a better margin from sales vs smaller competitors
Cons
  1. Shell is exposed to volatile energy demand and rapidly changing energy prices
  2. The energy transition could lead to a fall in prices for conventional fuel, also affecting natural gas and LNG prices on a 5-10 year horizon
  3. Supply chain disruptions in the EV segment and solar panels may push back the investments in renewables
  4. High volatility of energy prices affected the financial results in 2022, however, the market will be gradually stabilised after new trading flows are established, pushing down the price for oil
Risks
  1. Macro environment and geopolitics affect demand for fuel prices and potential production. Slow-down of economic growth and raising inflation to influence the demand/supply balance contributing to energy and chemicals' price volatility
  2. Cost inflation acceleration may result in long payback periods for new investments
  3. The company operates in 70 countries with different political, legal, and fiscal regimes and may be exposed to negative political, macro, and FX trends
  4. The company's ability to execute large exploration and production projects affects the future reserves base and production
Historical price chart
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Peer Group (top 5)

Company RIC Market Capitalization, $mn Last reporting year P/E Fwd 1Y P/E Fwd 2Y EV/EBITDA 1Y fwd EV/EBITDA 2Y fwd EV/Revenues 1y fwd EV/Revenues 2y fwd
Shell PLC SHEL.L 209,988 2022-12-31 6.3 6.5 3.5 3.8 0.7 0.8
TotalEnergies SE TTEF.PA 152,918 2022-12-31 5.4 5.8 3.1 3.5 0.7 0.7
BP PLC BP.L 117,445 2022-12-31 5.8 6.0 3.3 3.5 0.6 0.7
Equinor ASA EQNR.OL 94,272 2022-12-31 5.8 6.1 1.3 1.5 0.6 0.7
Eni SpA ENI.MI 50,747 2022-12-31 4.5 4.9 2.7 2.8 0.6 0.6
Repsol SA REP.MC 21,794 2022-12-31 4.3 5.3 2.2 2.6 0.4 0.4
Financials
2017 2018 2019 2020 2021 2022 2023 2024 2025
Revenue 305,179 388,379 344,877 180,543 261,504 381,314 367,819 361,335 355,505
Growth 27% -11% -48% 45% 46% -4% -2% -2%
EBITDA 39,690 52,722 57,556 29,518 54,195 79,913 74,681 70,174 67,504
EBITDA margin 13.0% 13.6% 16.7% 16.3% 20.7% 21.0% 20.3% 19.4% 19.0%
Net income 12,977 23,352 15,842 -21,680 20,101 42,309 33,788 30,555 28,496
Net margin 4.3% 6.0% 4.6% -12.0% 7.7% 11.1% 9.2% 8.5% 8.0%
Net debt 65,473 50,340 78,800 76,184 52,229 43,705 43,705 43,705 43,705
MktCap 242,376 139,850 171,306 216,214 216,214 216,214 216,214

Historical Multiples

2019 2020 2021 2022 2023 2024 2025
EV/Revenue 0.9 1.2 0.9 0.7 0.7 0.7 0.7
EV/EBITDA 5.6 7.3 4.1 3.3 3.5 3.7 3.9
P/E 15.3 -6.5 8.5 5.1 6.4 7.1 7.6
Charts