Perspectives of Oil Stocks Are Rising: Shell
Shell stocks are
trading 8% off their 2022 peak prices. The company has recently reported strong
financial results in Q3 2022 and announced that its dividend could go up by 15%
in the near future. The company’s management spent over $6 billion for buy back
operations during the third quarter and is going to spend another $4 billion on
this by the end of 2022. If the company continues to buy back its own shares
with this pace over the next two quarters, Shell free float could decrease by
10%. Its shares are now trading at $56 per share, but management’s efforts may
push the price to $65, above pre pandemic levels.
The company continues
to invest in oil and gas exploration and production. Shell invested $18 billion
in traditional energies, well ahead of the $2.4 billion investment in green
energy. This is a positive sign considering the current market situation. A
faster move towards green energy on a global scale is seen unjustified. More
governments are now betting on traditional carbon energy resources and are
ready to support such efforts.
Shell is thought to
accumulate $33 billion in free cash flow, sending $7 billion to dividend. The
other $26 billion will be distributed to buy back operations and debt
redemptions. So, the company is seen to be very strong at the moment.
Wells Fargo published research
saying the investments in the oil and gas sector is one of the best decisions
to be made during high inflation periods. Oil prices have soared by 40% since
2000, well above the return from many S&P 500 listed companies. The demand
for oil is not falling dramatically despite high prices. Many developing
countries may increase the demand in the longer term considering demographic
and economic factors such as rising GDP. More oil is expected to be used for
electricity generation.
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