Published On: Sun, Nov 4th, 2012

Royal Dutch Shell on the up according to the Telegraph

Royal Dutch Shell recently announced its plans to expand on its current production levels by more than 20% over the next 4 years. While many have suggested that this could drastically hamper any potential return as they reinvest any would-be-profits into their expansion projects, that only really covers the short term. For the long term investor this could very well be extremely profitable. Such plans can backfire, as we have seen with the recent downfall of BG Group — the owners of British Gas.

Shell have been slowly moving away from oil of late, in favor of gas, which is reflected in their statistics for the last quarter. Production of liquid energy dropped by around 4%, which was compensated for by an increase in gas output of 4%.

Obviously when we are deciding whether we should invest in a company we will need to take a look at its financial figures, which is why Shell’s proposed increase of production and generally aggressive plan for the next few years is so attractive for us as investors. The expected increase in production would its production by 800,000 barrels per day by 2018 when compared to its 2011 figures. Those sort of numbers will surely impact their bottom line and cash flow in a dramatically positive way.

With a recent rise in the company’s dividends to 43c and the inevitable capital appreciation that would increase the company’s outlook should the pieces of the puzzle begin to fall into place, this is definitely an investment that is worth a closer look. With most analysts predicting the end of the current economic crisis to be around 2015-2020, demand would also drastically increase as their plan begins to come to fruition.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.