Will Shell (RDS.A) Stock Be Affected By A Reduced China Shale Venture?

NEW YORK (TheStreet) -- Royal Dutch Shell (RDS.A)  , which has the first shale-gas production sharing contract in China, will reduce its project in Sichuan province because of geological challenges and the area's dense population, Bloomberg reports.

The company and China National Petroleum Corp. had planned billions of dollars in investment from this year to meet the country's energy demand., Bloomberg said.

Shell will now focus mainly on the development of the Changbei tight gas field in the Shaanxi region.

Shares of Royal Dutch Shell are up 0.33% to $80.07.

TheStreet Ratings team rates ROYAL DUTCH SHELL PLC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROYAL DUTCH SHELL PLC (RDS.A) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 205.5% when compared to the same quarter one year prior, rising from $1,737.00 million to $5,307.00 million.
  • RDS.A's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • ROYAL DUTCH SHELL PLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($15.30 versus $5.18).
  • You can view the full analysis from the report here: RDS.A Ratings Report
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