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Shell Jumps on Promise of Shareholder Windfall After Permian Sale

Shell Jumps on Promise of Shareholder Windfall After Permian Sale

21 Sep 2021

Royal Dutch Shell (LON:RDSa) is trading up 4.65% at 17.688         

Royal Dutch Shell (LON:RDSa) ADRs (NYSE:RDSa) traded 4% higher in premarket Tuesday on the energy giant’s plans to return to shareholders a large part of the cash it will get from the sale of Permian assets to ConocoPhillips (NYSE:COP).

Under the deal announced by the companies Monday, Shell has agreed to sell all its assets in the Permian basin, the most active U.S. oil field, to ConocoPhillips for around $9.5 billion. Of this, Shell plans to return to shareholders $7 billion in the form of dividends and buybacks. This will be in addition to the 20%-30% of cash flow from operations the company plans to return to its shareholders on a routine basis.

The remaining cash will be used to strengthen the balance sheet, the company said.

The deal is part of the broader industry-wide shift towards cleaner energy, which is forcing Shell to focus on its most profitable high-carbon businesses and grow a portfolio of lower-carbon assets. Just last week, Shell announced plans to build one of Europe’s biggest biofuels facilities, an 820,000-ton per year unit in the Netherlands.

Shell’s exit from the Permian is a recognition that it cost too much to expand its presence there to optimal scale.

On technical fronts Royal Dutch Shell (LON:RDSa) RSI stood at 60.80 and currently stock is trading above all Moving Average. So, BUY position can be taken with following target and stoploss:

TRADE SIGNAL – : Royal Dutch Shell (LON:RDSa) – BUY : 17.68, TARGET: 18.58, STOP LOSS : 16.96