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Seeking Alpha: Royal Dutch Shell: Growing Investor Interest?

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Posted on Feb 27th, 2007 with stocks: RDS.A

Kurt Wulff (McDep Associates) submits: Buy the common shares of Royal Dutch Shell plc (RDS.A) for appreciation potential of 23% to estimated net present value of $84 a share, that depends first on crude oil production (40%), second on refined products (39%), and third on natural gas (21%).

Fourth quarter 2006 results reported on February 1 exceeded our estimates of cash flow and earnings that reflected recent company and industry trends. Reserves added in 2006, including oil sands, exceeded production by more than the amount reserves will be reduced in 2007 for a revised agreement with Russia on the Sakhalin Island project.

Oil for delivery over the next six years priced currently at $63 a barrel may resume an uptrend by crossing above the 40-week average later in 2007 (see chart, Six-Year Commodity Price Meter, below). Downstream profits, though volatile, are projected at the same level as for the past four quarters. Stock price on a rising 200-day average suggests growing investor interest.

We favor RDS stock at a full weighting in our illustrative energy portfolio concentrated on real assets that promise a high return providing clean fuel for global growth.

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