Category Archives: The In & Out

Shell I sell?

Oil… a slippery slope, indeed. So did Shell pounce too early? Of course, it did. Despite protestations to the opposite. Shell reiterated the company’s commitment to maintaining its dividend, even though the shares had an “outrageous” yield of about 7.8 per cent, reflecting investors fear that the payout could be cut.

Ben van Beurden, Shell’s CEO,  suggests that over time there was likely to be a floor under oil prices at $70 per barrel, but adds he does not know when the market would get back to that level. Phew… Anyway, according to Mr van Beurden share prices have been “knocked about”, and their valuations were driven by “risk aversion and volatility at the moment, rather than careful considered pricing”. And so the story continues… nothing to do with a supply glut, of course! The rationale behind Shell’s proposed takeover of BG Group for a whopping £43 billion surely doesn’t require further explanation? Clearly a brilliant deal that will produce synergies galore and help the newly created oil giant to maintain its generous dividend. Investors should be dancing in the street… . Well, Mr van Beurden, they don’t. You pounced too soon and the message from investors is clear: Renegotiate or pull out altogether. A takeover on current terms and conditions will turn into a classic case of value destruction on an epic scale.