• Looking for Shells down on the Gulf of Mexico………

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    Above, a sunny beach on the Gulf of Mexico.

    Given the present collective insanity on the part of the politicians and the media surrounding Brexit – today’s EU Referendum blog-post refers (http://eureferendum.com/blogview.aspx?blogno=86758), today’s article concentrates on goings on in the real world, and is a follow on to yesterday evening’s second article (http://www.british-gazette.co.uk/2018/01/31/memo-to-mr-ben-van-beurden-ceo-of-royal-dutch-shell-plc-remember-deepwater-horizon/) in which this organ issued a strong note of caution to Mr Ben van Beurden CEO of Royal Dutch Shell plc.

    Hopefully Mr van Beurden is aware of the risks. Shell invests heavily in the US. Today and it’s strong performance reported was in the minds of the London market makers offset be a decline in the company’s cash flow. This however was largely due to cyclical effects nevertheless the importance of cash flow is this: companies require good cash flow to pay good dividends!

    “The Board of Royal Dutch Shell plc (“RDS”) today announced an interim dividend in respect of the fourth quarter of 2017 of US$0.47 per A ordinary share (“A Share”) and B ordinary share (“B Share”), equal to the US dollar dividend for the same quarter last year: 1st February, 2018.”
    GOTO: https://www.shell.com/media/news-and-media-releases/2018/fourth-quarter-2017-dividend-announcement.html
    GOTO: http://www.lse.co.uk/shareprice.asp?shareprice=RDSB&share=royal_dutch_shell_plc_%27b%27_ord_eur0.07

    To understand the market’s sensitivity to the announcement of the Shell dividend one must understand the importance of this single stock – and it’s dividend – to the London stock market, the financial services industry and to many investing members of the British Public. This is because Royal Dutch Shell plc is the largest (by a country mile) and most important dividend stock on the London market. It and it’s dividend is a major component of many institutional funds (unit trusts/investment trusts/unitised insurance funds) that seek to return a dividend to their investors.
    Here is an interview with Mr van Beurden on Bloomberg: https://www.bloomberg.com/news/articles/2018-02-01/shell-s-best-profit-in-3-years-marred-by-surprise-cash-flow-drop
    Added to the news of the discovery that was the subject of the previous article Reuters report that Royal Dutch Shell plc have purchased nine out of the nineteen blocks in the Gulf of Mexico that are under Mexican sovereignty.
    GOTO: https://www.reuters.com/article/us-mexico-oil/shell-sweeps-nine-of-19-blocks-awarded-in-mexico-oil-auction-idUSKBN1FK278
    It is to be noted that certain blocks whilst being in Mexican waters are close to US waters.

    The announcement that this quarter’s dividend will be the same as the same quarter last year demonstrates commendable caution on the part of Mr van Beurden and his fellow directors.

    The purchase of these blocks also demonstrates that Mr van Beurden and his fellow directors are fully committed to the basic core business of Royal Dutch Shell plc – the discovery and exploitation of crude oil and that the recent highly publicised forays into “Green diversification” are just that – forays.

    Of course, for your Editor and the many other individuals, companies and mutual funds this does NOT mean that shareholders of Sterling denominated “B” shares can expect to receive the same 38.64 pence per share they received last year! This is because it depends upon the Rate of Exchange betwixt the US Dollar and the £ Sterling. Last year it was the rate pertaining on Friday 10th March, 2017. This year it will be the rate pertaining on Friday 9th March 2018.

    Now, as then, the $/£ RoE is highly dependent on the mess the government is making of Brexit!
    The view on the currency markets is that Sterling’s appreciation against the [US] Dollar has ended for now and that it will remain around current trading levels.
    GOTO: http://uk.businessinsider.com/pound-dollar-exchange-rate-early-2018-rally-pantheon-macroeconomics-2018-1/
    So we might gratefully receive around 33 pence a share on Monday 26th March 2018. A reduction of over 1/- a share in old money! That again will have influenced the decline in Shell’s SP.
    The FACT of the matter however is that nobody knows for sure! We will just have to wait and see!

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