Royal Dutch Shell´s shares
dropped on Thursday after unveiling a fall in profits. However, accounting profits include non-cash items, in this case those related to Nigeria. In that regard, the company´s cash-flow remains strong. Its operating cash-flow is 4.4bn pounds year-to-date, down only five per cent on the same period of last year. As well, at just 11.2 per cent on the basis of the company´s own calculations, its gearing remains far from becoming an issue. Hence, the company´s balance sheet is still very strong. As well, the firm always has recourse to asset sales to generate any cash that it may deem necessary. Most importantly of all, the firm is running about a year - or 23bn dollars - ahead of schedule with its five-year 130bn dollar
Furthermore, management have said this will be the peak year of net capital investment. All of the above means that Shell has the necessary assets to continue as one of the largest dividend stocks on the FTSE. Over the long term, shares are trading on 9.5 times forecast earnings, falling to 8.4 times next year, and offering a forecast dividend yield of 5.1 per cent, so this remains a solid place to park cash. The Daily Telegraph´s Questor team also thinks there is a good possibility shareholder returns will accelerate through buy-backs next year as assets are sold. Questor concludes bv saying Buy.
Yesterday´s third quarter figures should help oil and gas explorer BG Group to win back some friends. The recent fall in gas prices means that it can make more from exporting cheap American gas to Asia. Furthermore, North Sea production should soon recover as rigs come back on-line after scheduled maintenance. It will also be augmented by big new projects such as Jasmine. Investors are also waiting on the outcomes of two massive investment projects, each of which has the potential to transform the business for years.
In Queensland, Australia, an enormous $20.4bn project to tap coal seam gas and convert it into LNG is making good progress, with the first gas due to reach the plant by the end of the year and the first cargo to be shipped in 2014. In parallel, well performance from the Santos Basin is exceeding expectations. Brazil also continues to throw up more reserves and could be a transformative project for BG. The group is on track to make profit before tax of $7.9bn this year, slightly down on the $8bn posted for 2012. After yesterday's 3% rise in the shares to £12.79 they trade on a multiple of just less than 16 times, dropping to 11 times´ 2015 prospective earnings. The forecast yield is about 1.3%, The Times´ Tempus says.
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