Company in the news: Royal Dutch Shell

Anglo-Dutch oil giant Royal Dutch Shell (LSE: RDSB) shocked the City with a profit warning last week. Some of the problems it discussed, such as loss-making shale gas projects in America and ongoing issues with oil theft in Nigeria, are not new.

However, Shell is also now making less money from refining (turning oil into other products) and selling petrol. Some of its high-value oil and gas fields have suffered from higher-than-expected costs and have been producing less than hoped too.

Yet it’s always a good idea to watch the City’s reaction to these sorts of warnings, and the reality is that no one seems to be particularly concerned – the shares really haven’t fallen much. So you can’t help thinking that the new chief executive Ben van Beurden is doing some clearing of the decks now so that life might be a little easier for him later on.

That said, Shell has a lot of work to do as it continues to underperform its peers. It needs to stop spending money and focus on getting more cash through the door. The company knows this and is on the case.

It has some good assets, strong finances and a decent dividend, which analysts expect to be maintained. Providing oil prices stay between $80 and $100 per barrel, Shell could be generating lots of surplus cash in a couple of years’ time. This is not the time to sell.

Verdict: buy for dividends

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Prime location

The best property buys in the eurozone

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


26 May 1885: Charles Dow launches the Dow Jones Industrial Average  

The Dow Jones Industrial Average, one of the world's most watched and most cited stock indices, began life on this day in 1885.

The Kids' Portfolio: the four best funds to buy for your children

Investing for your children's long-term future is an excellent idea. But what should you buy? The Kids' Portfolio is a simple collection of four funds intended to be tucked away for 20 to 40 years.