Business & Investment

Royal Dutch Shell says oil production has peaked-should I buy shares in the company now?

FTSE 100-Listed oil producers Royal Dutch shell (LSE: RDSB) On Thursday it said it reached peak oil production. From now on, pumping from black gold will be 1% to 2% slower each year.

At the same time, the Anglo-Netherlands company reaffirmed its commitment to achieve net zero emissions by 2050. Shell also said it would accelerate its goal of reducing net carbon strength by at least 3% by 2022.

All this is a significant turnaround for companies whose business models have been based on oil and gas production for decades.

Some institutional investors in Shell have been pushing this move for quite some time now, and the company’s focus now seems to be shifting towards more environmentally friendly.

But what does this mean for Shell’s stock price? Will this transition from core business be successful not only for the planet but also for shareholders?

Slippery slope

Shell lost more than 36% of its stock value last year. As a decrease in oil demand This has led to a decline in Brent crude oil prices.

Oil price Perform recovery In the last few months, the barrel is now around $ 60. However, the damage caused by the fall to $ 20 in 2020 had a major impact on Shell’s profits.

Shell announced last week that it hit a 20-year low in 2020, when it lost $ 21.7 billion in profits. This is a staggering number and reminds us of the difficult situation in which the shell is working.

These numbers underscore the need for a transformation of Shell’s business. I don’t know how easy it is for a company to pivot towards a greener energy source.

US President Joe Biden has promised trillions of dollars for a package aimed at helping the economy move to a 100% renewable energy model by 2050.

Shell has a lot to do to convince investors that it’s not an oil-dependent company. I include myself in it, so I’m not going to buy Shell stock right away.

How will Shell’s stock price rise?

However, like any other investment, the value of the company may increase in the next few years. Stock prices have hit their lowest since falling below 900p in October in the mid-1990s. Value investors may be advised to punt so that the value does not drop any further.

Despite all the bad news, Shell actually announced an increase in dividends last week. Payments will increase by 4% to 17.35 cents per share. However, it should be noted that the same dividend was reduced by two-thirds in April 2020.

Shell has traditionally been one of the largest earners on the FTSE 100, and we are confident that management will do everything possible to maintain its reputation. If this can be combined with a real move towards clean energy, stock prices could rise again.

At this point, I’m not a stock buyer right now because I think there are too many factors against stocks and the outlook is too uncertain.

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Royal Dutch Shell says oil production has peaked-should I buy shares in the company now? Royal Dutch Shell says oil production has peaked-should I buy shares in the company now?

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