Royal Dutch Shell has rallied this week after the release of third quarter earnings. The company beat expectations for income and also announced a surprise dividend hike.
The Anglo-Dutch energy major saw a return to profit after a record loss of $18.1 billion in the second quarter. Income attributable to shareholders came in just shy of $500 million, which was still 90% lower than last year’s $5.9 billion, but this is due to the effects of the coronavirus on oil prices and demand.
Shares in Shell have pushed higher this week from lows of 878 to 945, which includes a 2.25% gain today. The move higher could see a significant low as virus cases surge and oil traders price-in a gloomy outlook for demand. There has been talk of a potential coronavirus vaccine in December so we may be seeing the depths of the crisis as Europe moves to further lockdowns. The dividend increase may also attract institutional investors.
The company also announced a cash allocation framework that aims to reduce debt, increase shareholder distribution, and support disciplined growth. The framework aims to reduce debt to $65 billion form the current $75bn, which would then trigger plans to distribute 20-30% of cash flow from operations to shareholders.
The price of Shell has touched a low of 878 on the week and this has setup a potential double bottom at the low set near the end of September. Price has also broken out of a downtrend resistance line and the path is now clear to the 1,000 level with key resistance coming in at 1035.
