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ARGUS downgrades Royal Dutch Shell plc (NYSE: RDS.A) from Buy to Hold

February 2, 2009 11:54 AM EST 

ARGUS analyst says, “The company’s production guidance for 2009 was disappointing, and we are concerned about the impact of its higher-cost resource base on profitability and cash flow. During the company’s 4Q08 conference call, management lowered 2009 production guidance to flat to slightly down; we had been expecting 2%-3% growth. In addition, its after-tax profit per produced barrel (excluding oil sands) declined to roughly $12, as lower oil prices weighed on results. While the company has a solid balance sheet, interest-bearing debt increased by $6.4 billion in 4Q08, and we think it will likely add more debt in the relatively more challenging hydrocarbon-price environment we anticipate in 2009 and 2010.”

“We are maintaining our long-term Buy rating as we believe management’s strategy to upgrade the company’s resource base through increased capital investments, divestment of noncore assets, and a heightened emphasis on gas, unconventional oil and other large-scale, long-lived projects are pointing the company in the right direction.”

Royal Dutch Shell plc (Shell) is a holding company, which owns, directly or indirectly, investments in the numerous companies constituting the group.


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