The Royal Dutch Shell Company, commonly known as Shell, is one of the largest oil and petrochemical companies in the world, with interests in virtually the entire oil value chain, from exploration through to oil trading.
The Shell company is also a member of “Big Oil”, a term used to describe the 7 biggest oil companies traded publicly.
The company was founded in 1907 when two competitors, the Netherland’s Royal Dutch Petroleum Company and the United Kingdom’s Shell Transport and Trading Company Limited, merged.
Initially, the company operated as a dual-listed company with each constituent maintaining its legal status, but both pursuing business interests as a single partnership.
However, in 2005, the century-old duality was officially dissolved, with the company starting to operate as a single entity.
The company is headquartered in The Hague, Netherlands, and it operates in 4 business segments: Upstream, Downstream, Integrated Gas and New Energies.
From the very beginning, Shell’s ambitions were to start and stay at the top of energy and petrochemicals around the world.
Over the years, the company has made strategic acquisitions around the world to support their big goal.
Some of their biggest buys include the 2010 $4.7 billion acquisition of East Resources, a deal that exposed Shell to the coveted opportunity of natural gas in shale in the United States.
Also, the 2016 acquisition of BG Group for $53 billion, a deal that formed the world’s largest producer of liquefied natural gas (LNG) and propelled Shell to become the second most valuable non-state oil company, behind only Exxon Mobil.
Shell has a primary listing on the London Stock Exchange, but it is also cross-listed on the New York Stock Exchange and the Euronext Amsterdam.
The company stock trades under the ticker symbols RDSA and RDSB. The dual listing is available in all the 3 exchanges and investors can buy any type they wish.
The primary difference between RDSA and RDSB is their location, with the former listed in the Netherlands and the latter in London. The Dutch listed RDSA shares attract a 15% withholding tax on dividends as is applied in the Netherlands, whereas there is no withholding tax applied on London listed RDSB. Other companies with a similar dual listing in major exchanges include Unilever and BHP Billiton.
Royal Dutch Shell Stock History
The Shell stock is closely tied to oil, a commodity that has always experienced volatility in its pricing. The 1980s US deregulation of the oil industry saw prices of the commodity fall, inspiring a plunge of Shell stock to circa $8.
The 1990 first Gulf War brought some volatility to the oil prices, but prices stabilised after US intervention. Shell stock gradually drifted higher in succeeding years as it continued its global expansion, hitting a high of above $32 in 1997. It would then plunge to below $10 the same year and remain suppressed even after the turn of the century.
It was only in 2005 that the stock managed to jump above $20. The gradual rally would be halted by the effects of the 2008 global recession that pushed the stock to just below $20 by June 2009.
The subsequent global economic recovery triggered a rally in oil prices and the Shell stock managed to steadily climb to a high of $65 by August 2014.
Oil prices then hit a shocking decline with the famous 2016 crash that saw prices of the commodity tumble to lows of below $30 which did not bode well with the Shell stock, which also plunged to circa $30.
The stock then recovered along with oil prices and managed to print an all-time high of just above $75 in 2018. The growth of US shale, coupled with weak global demand in 2020 pressured the stock lower once again.
Shell is a consistent dividend payer, and it has a company policy to grow dividends in tandem with their underlying cash flow and earnings.
Since 2018, the company has also been implementing a $25 billion share buyback program which it paused in 2020 due to a tough business environment. Share buybacks usually trigger higher stock prices because they boost earnings per share.
How to Trade Royal Dutch Shell Stock
Shell is one of the most-watched stocks due to its massive global footprint. Here are some of the factors to consider when trading the stock:
- Tariffs and Trade Agreements
With operations in over 70 countries around the world, Shell is truly a global player in the oil industry. This, however, leaves the company susceptible to changes in tariffs and trade agreements in different jurisdictions.
- Legislative and Taxation Policy
Oil is a sensitive commodity and various jurisdictions have enacted different legislation and taxation on its circulation or consumption. Some countries even apply price controls. This can impact the bottom line of the company. Additionally, as mentioned above, there are tax implications when investors decide whether to buy RDSA or RDSB stocks.
- Lawsuits and Negative PR
The nature of Shell’s business, particularly in exploration, has always attracted greater scrutiny on the role the company has played in damaging our environment over the years. With consumers going green, such lawsuits and negative PR could hurt the Shell stock price. Notably, in 2019, the company was sued by Friends of the Earth Netherlands in a case that represented 7 organisations and over 17,000 individual plaintiffs.
- New Product Rollout
The energy market is now all about innovation with a view of promoting sustainability. Shell’s New Energies business is responsible for innovation along those lines, and important announcements can positively impact the stock. On the other hand, new competitor product rollouts could negatively impact the Shell stock.
- Periodic Earnings Reports
Shell’s fiscal year runs from January to December and the company releases quarterly and annual reports that illustrate the underlying health of their business. Positive reports, such as growing corporate profits, usually impact the stock positively, whereas negative reports, such as profit warnings, have a negative impact on the stock.
As Shell operates in a volatile industry, it is wise to assess these factors for their short and medium-term impact, rather than the long term.
** Disclaimer – While due research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.
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Shell stock FAQ
- Why should I trade Shell shares?
Royal Dutch Shell, or simply Shell as it is often referred to, is one of the largest and most diversified companies in the oil and gas industry. It has operations that span the globe, and it is active in every step of the oil process, from exploration and drilling, to refining, to transport. There’s no part of the gas and oil supply chain that Shell does not participate in. If you’re looking for a way to participate in the oil industry without trading crude oil, then shell might be the perfect stock to choose considering its tight correlation to oil pricing.
- Is Shell the best integrated oil & gas stock for trading?
There are a number of large cap integrated oil companies, and all of them experience volatility when oil prices experience volatility. In that regard Shell is equal to the other companies in this space. However, some experience more volatility than others depending on the areas in which they are most heavily leveraged, or based on their financial standing. Because of these changing conditions there will always be a different stock that could be called the best, but in general you can always consider Shell to be a good stock to trade within its sector.
- What’s the best strategy for trading Shell shares?
Because Shell stock is so tightly related to the events that move the price of oil a trader could find success by trading the stock based on events that occur which move oil prices. These include such things as wars and other supply disruptions, or changes in demand due to the changing seasons, holidays, or as we’ve seen in 2020, pandemics. There is always news occurring in the oil chain that will have an impact on oil producing companies such as Shell, and the trader who learns to read these fundamental events properly can successfully speculate on the price changes in Shell shares.