Oct. 21, 2016 10:17 AM ET
- Shell is announcing further divestments, this time selling part of its shale operations in Canada.
- These moves do little to address the giant debt load, although they allow for cash flow neutrality this year.
- Asset sales, resulting in smaller operations, combined with shareholder dilution hurt the long term potential as management stubbornly tries to preserve the dividend.
Royal Dutch Shell (RDS.A) announced another round of divestments in order to keep leverage under control, even as oil prices have rebounded a bit in recent times. These modest divestments are countercyclical and hurt production quite a bit in relation to the proceeds. At best cash outflows come to a standstill this year following these moves, although they result in a smaller business going forward, while investors see dilution of the shareholder base in order to sustain the unsustainable dividend.