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RDS: Cash Surge Coming

LUCAS HERRMANN, Deutsche Bank (07/07/2010)
"Cash Surge Coming—Two years ago we wrote that to our minds the question on Shell was no longer 'should I invest' but 'when do I invest?' With projects that account for almost 30% of Shell's upstream value commissioning over the next 6–9 mos., we revisit our investment case and find a well-diversified business that, under the direction of a new CEO and significant exploration success, looks even better placed to deliver a strong and sustainable uplift in cash flows and value. . .the recent pullback affords an excellent entry point: Buy.

The startup of a suite of its mega projects over the next 6–9 months combined with improved resource optionality at a time of enhanced investment discipline suggests to us a much improved financial outlook. . .with over 600kboe/d of new production concentrated on long-lived, plateau-type assets requisite of limited future investment the quality of, and visibility around Shell's production base looks set to rise markedly. The diversity of its portfolio also suggests a lower level of corporate risk than many in the industry."

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