Shell Set to Thrive in New Energy World
The long-expected production cuts by OPEC nations won’t be truly felt for months to come, though it appears that a number of analysts believe that the bottom line of Royal Dutch Shell should be among the biggest beneficiaries of the decision. That’s because the company’s current strategy of divestment could offer more potential buyers, which can ultimately drive up the prices on such sales.
The oil price slide that began in mid-2014 eventually hit rock bottom last February, when prices dropped to a once-unthinkable $26 per barrel. That coincided with Shell’s official purchase of liquefied natural gas producer (LNG) BG Group, which was made in order to help the company diversify its markets.
To help alleviate the steep cost of that purchase and the subsequent debt incurred, Shell found a way to eliminate $30 billion from its spending costs for 2016. This included cutting back on searching for new oil options and also putting to an end considerations like an Abu Dhabi-based project that sought out new sources of sour gas.
While maintaining such discipline can often be difficult, Royal Dutch Shell is still looking to find buyers for other assets they currently hold. In truth, the company had little choice other than to undergo a financial belt-tightening. That’s because company stockholders were staring at possible reductions in Shell’s legendary dividends, which caused them to demand that a financial cleaver be taken to the corporation’s spending budget.
Those stockholders have been rewarded in the past four months, with the company’s stock price having jumped by 16 percent. In truth, all of the other oil giants have seen similar jumps. However, the fact that Shell is now officially positioned as the top LNG producer figures to make that stock price takes continued steps upward.