Royal Dutch Shell PLC

Hague, Netherlands-based Royal Dutch Shell Plc (RDSA) is an international group of energy and petrochemical company, which is involved in the exploring, producing, refining and marketing of oil and natural gas.

On 30^th January 2020, the company will announce the fourth quarter of 2019 results.

Financial Highlights (Q3 FY2019 and 9M FY2019
In the nine months of the financial year 2019 under consideration, the group’s revenue stood at $260,871 mn, which was 8.83% below against the $286,151 mn recorded in 9M FY18, led by a dip in the revenue from Integrated Gas, Downstream, and Corporate segments during the period. The basic earnings per share for 9M FY19 was $1.84 versus $2.14 in 9M FY18. For the nine months of 2019, the dividend per share stood at $1.41 and remained the same from the corresponding period of the last year, while in Q3 FY19 the dividend per share was $0.47. Cash flow from operating activities surged by 3% to $31,913 million in 9M FY19 against the same period in 2018.

Share Price Performance

Daily Chart as at November-14-19, before the market closed (Source: Thomson Reuters)

On 14^th November 2019, Royal Dutch Shell PLC shares were trading at GBX 2,310 at the time of writing before the market close (at 10:04 AM GMT), down by 1.113% against the previous day closing price. Stock's 52 weeks High and Low are GBX 2,811.38/GBX 2,209.50.

Conclusion
During the fourth quarter of 2019, the group's Integrated gas production is expected to be in between 920 and 970 thousand barrels of oil per day, and LNG liquefaction volumes are expected to be between 8.8 and 9.4 mt. Upstream Production is expected to be in between 2,650 and 2,800 thousand barrels of oil equivalent, and Refinery availability would be in between 87% to 92%, respectively. Oil Products sales volumes are anticipated to be in the range of 6,650 – 7,050 thousand boe/d. Chemicals manufacturing plant availability is estimated to be in the range of 81% – 86%. For the full year 2019, the cash capital expenditure is anticipated to be around the lower end of the $24 – $29 billion range. The company earnings demonstrate the toughness of the market-facing businesses and their capability to capitalise on market conditions, with robust trading.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 2,310 (as on November 14, 2019, before the market close).
 

BP PLC

London, the United Kingdom-based BP Plc (BP) is a global energy company. The operations of the group are divided into the four operating segments which are Upstream, Downstream, Rosneft and Other businesses and corporate.

Recent News
The company announced on 13^th November 2019 that Nils Andersen, as a non-executive director of the company, has stepped down and resigned. Melody Meyer is appointed as the Committee's chair with an immediate effect.

Financial Highlights (Q3 FY2019, US$)
The company’s results for the current period was impacted by the maintenance and weather effects, lesser prices, leading to lower Upstream earnings. The company’s underlying replacement cost profit for the third quarter of the fiscal year 2019 stood at $2.3 billion against the US$3.8 billion a year ago. For Q3 FY19, the company’s Gulf of Mexico payments were US$0.4 billion (post taxation). In Q3 FY19, the group declared a dividend per share of 10.25 cents and suspended the option of the scrip dividend.

Share Price Performance

Daily Chart as at November-14-19, before the market closed (Source: Thomson Reuters)

On 14^th November 2019, BP PLC shares were trading at GBX 511 at the time of writing before the market close (at 10:04 AM GMT), up by 0.04% against the previous day closing price. Stock's 52 weeks High and Low are GBX 583.41/GBX 479.55.

Conclusion
The company demonstrated the toughness of the financial performance in the third quarter of 2019,even at lower prices. The net debt remained flat in the existing period. For the current quarter, the underlying effective tax rate was lower than previously indicated, mainly driven by a lower-than-anticipated effect from the Upstream profit mix and higher-than-anticipated estimated Rosneft earnings. The strong industry connections and diversity in operations will support the future growth of the group with robust fundamentals.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 510.80 (as on November 13, 2019).
 

Tullow Oil PLC

London, United Kingdom-based Tullow Oil PLC (TLW) is a prominent independent oil exploration and production group, which works across all stages of the oil life cycle from exploration to production.

On 15^th January 2020, the company will announce the trading statement ad operational update.

Trading Update (as on 13^th November 2019)
The company announced a trading update for the period 24th July 2019 to 13th November 2019. The group reported that the West Africa net oil production from Ghana and non-operated portfolio is expected to be at an average 87,000 barrels of oil equivalent per day for the full year 2019. As per the group, this is marginally lesser than the prior estimates made by the company majorly because of the Ghana’s production performance.

The group also highlighted that the Full-year 2019 Capital Expenditure is expected to be at $540 million and free cash flow is expected to be at $350 million.The company reported that the net debt would be approximately $2.8 billion at the end of the period.  The company also updated that the Kenya project made its first cargo exports from the East African segment worth 240,000 barrels of oil from Mombasa.

Share Price Performance

Daily Chart as at November-14-19, before the market closed (Source: Thomson Reuters)

On 14^th November 2019, Tullow Oil PLC shares were trading at GBX 145.36 at the time of writing before the market close (at 9:15 AM GMT), down by 2.87% against the previous day closing price. Stock's 52 weeks High and Low are GBX 254.71/GBX 142.55.

Valuation Methodology

Conclusion
The company’s oil production, including production-equivalent insurance payments, for the full year 2019 is anticipated to average approximately 87,000 bopd. This is marginally below from the previous guidance, driven by the Ghana production performance. For the full year 2019, the gas sales from TEN are anticipated to average approximately 125 boepd.

For the full year 2019, the company expects to provide strong free cash flow.This has been supported by the commitment to decrease the debt further and pay returns to the shareholders with continued disciplined capital investment. The company released two oil discoveries in Guyana at the Joe-1 well and Jethro-1 well. In August 2019, the first-ever cargo of East African oil from Mombasa played a vital role in the Project Oil Kenya. The company also had a decent progress with FID (Final Investment Decision) targeted in H2 FY2020. The non-operated assets maintain to perform well in West Africa. However, the company is operating diligently with the Joint Venture (JV) Partners to make sure that both fields work to their potential.

Over the last three years, the company’s financials have reported a strong growth, which indicates the strong operations of the group. Over the past three years, revenue has risen at a CAGR of 18.39%, while gross profit rose at a CAGR of 42%.

Based on the decent prospects and supported by valuation done using the above method, we have given a “BUY” recommendation at the current price of GBX 142.95 (as on 14^th November 2019, at 8:34 AM GMT) with a lower double-digit upside potential based on 12x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).

Premier Oil PLC

Premier Oil Plc (PMO) is a London, United Kingdom-based multinational oil and gas exploration and production company. The company has oil and gas interests in Latin America, the Falkland Islands, South East Asia and the North Sea, where the group seeks to invest in high-quality opportunities.

Trading and Operational Update (as on 14^th November 2019)
The company released the trading statement and operational update for the ten months to 31 October 2019. For the current period, the company’s production was averaged at 79.4 thousand barrels of oil equivalent per day (kboepd), with high group operating efficiency of 94 per cent. The company’s UK assets were averaged 55.3 kboepd, an increase of 27 per cent from the corresponding period of the last year, due to a complete contribution from the Catcher Area at higher plateau rates. The gross catcher Area rates for the ten months to 31 October 2019 was 69 kboepd and underpinned by a continued high group operating efficiency of almost 100 per cent. Over the current period, lease costs and operating costs were averaged $6 per barrels of oil equivalent (boe) and $12 per boe, respectively. In the current period, the company generated free cash flow of $300 million. On 31^st October 2019, the net debt decreased by $300 million to $2.03 billion against the $2.33 billion at the end of 2018.

Share Price Performance

Daily Chart as at November-14-19, before the market closed (Source: Thomson Reuters)

On 14^th November 2019, Premier Oil PLC shares were trading at GBX 89.35 at the time of writing before the market close (at 8:15 AM GMT), up by 3.08% against the previous day closing price. Stock's 52 weeks High and Low are GBX 110.20/GBX 54.70.

Conclusion
For the full year 2019, the company expects production to be at the upper end of 75-80 kboepd guidance.By the year-end 2019, the company persists in projecting initial gas from its managed BIG-P (Bison, Iguana and Gajah Puteri) fields in Indonesia. The company has hedged 41% of its Q4 FY2019 oil entitlement volumes at $70 per barrel and 29% of its H1 FY2020 oil entitlement volumes at $64 per barrel. In the full year 2019, the company’s exploration, development, and abandonment spending will be in the range of $300-$320 million. This was decreased from the prior expectations of $340 million, driven by the announcement of contingency spend related to the Bison, Iguana and Gajah Puteri drilling programme, and the Tolmount project tracking less budget. The company is underpinning the financial year 2019 net debt decrease guidance in excess of $300 million. For 2019, the company expects a covenant leverage ratio was 2.3x or lower than the covenant level of 3.0x.

The company continues to focus on the strategic priorities. Currently, the group is generating substantial free cash flow, which is materially deleveraging the balance sheet.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 86.68 (as on November 13, 2019).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.778029 GBP.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.