Shell cuts dividend for first time since WW2


Better week in the oil patch as the publications roundtable looking hard at Valero Energy Phillips Sixty six Chevron Canadian Natural Resources Williams Companies Shinya Energy Enterprise Products Partners Magellan Midstream partners conical phillips the cover story digs in on how the economic recovery will play out with spending consumer staple stocks and essential retailers with open stores are seen outperforming in the new environment as well as companies that have good liquidity and can grow their online sales. That list of pandemics survivors includes Walmart Nike Costco. Lowe's target urban outfitters dollar general. Last week saw Royal Dutch. Shell cut their dividend for the first time since World War Two and that's the stock recovery on this week's single stock focus. The Prophet Hunter wrote an article on Saturday about the dividend cut and said quote buyers. Beware Royal Dutch. Shell Asia's closed Friday at over thirty one dollars and the b-shares closed just under thirty dollars. The Prophet Hunter starts out by discussing energy transitioning to renewables and then talks about why this cycle may be different while some anything we could see an oil and gas megamerger wave. I believe they may be disappointed. At least in the short medium term listening to energy majors earnings call over the last couple of weeks suggest. Management teams are prioritizing the deployment of capital in the renewable energy sector where we could see the direction of travel for. Ma is towards acquiring utilities or renewable power producers in two thousand eighteen total acquire direct energy of French Electric Utility this followed their 2016 acquisition of saft a battery maker for over a billion dollars. The company plans to start producing batteries by twenty twenty three Prophet Hunter then goes on to discuss shells dividend cut when Shell announced a cut in its dividend on thirtieth April for the first time since World War Two. What was most striking was the severity? Of the reduction. A seventy percent cut which caught investors off guard and illustrates the existential crisis unfolding within boardrooms. I believe the move underscores the transition. To a new era the prevailing yield is now three and a half percent and could mark a major step toward repositioning the business towards renewable focused business those expecting the dividend to be hiked oil markets. Recover maybe left disappointed instead. Management could be on the hunt to acquire utility or invest directly in renewable projects. The good news is that renewables are increasingly becoming. The lowest cost mechanism of providing energy and household are beginning to embrace the transition to electrification of transport and reduction in plastics which also affects oil demand. The profit hundred then gets to the bad news. The bad news for the oil majors is they are relatively late to the party. Existing renewable players such as vestis next Aaron Canadian solar have already gained a significant footprint and offer investors. A pure play exposure to renewables as the big oil majors entered. The renewable space returns on capital are likely to disappoint given strong competition for capital from new and incumbent operators

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