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Shell surges as $12B credit facility boosts dividend hopes

|About: Royal Dutch Shell plc (RDS.A)|By: , SA News Editor

Royal Dutch Shell (RDS.A +5.6%) opens with strong gains after saying it expects only a “relatively minor” impact from the coronavirus on overall demand for its oil products during Q1.

Shell sees oil products sales volumes at 6M-7M bbl/day for the quarter, compared with 6.5M bbl/day in the year-earlier period, with Q1 upstream oil and gas production estimated at 2.65M-2.72M boe/day, with margins affected by the weak environment.

The company says it has secured a new $12B credit facility as it seeks to safeguard dividends, which follows a $10B facility obtained in December, combining to boost available liquidity to more than $40B.

“Shell has the balance sheet capacity and ability to cut capex to survive in the current environment without a significant cut to dividends, but if this outlook was to last for more than 9-12 months, we would expect a cut,” says RBC analyst Biraj Borkhataria.

Shell’s board “seems to be sending a clear message that the dividend payment is not under discussion,” says Russ Mould, director of investment at AJ Bell.

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