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Chevron Vs. Shell: Chevron Wins By A Landslide

Chevron Vs. Shell: Chevron Wins By A Landslide

: Oct 20, 2020

Summary
  • Over the last 5 years, Chevron has consistently outperformed Shell.
  • On financial metrics, Chevron looks much better than Shell.
  • Shell’s share count goes up, Chevron’s goes down.
  • Chevron’s dividend continues to go up while Shell cuts its dividend.

Shell’s zero-emission goals will limit profit potential.

According to Seeking Alpha (see here), Chevron (CVX) has replaced Exxon (XOM) as the largest oil company by MV (Market Value). In many ways, this is more a race to the bottom than a race to the top with CVX falling 39% YTD while XOM is falling 52%.

Another oil company in the doldrums is Shell (RDS.A) (RDS.B) whose price has fallen by 56%.

I have recently compared Exxon to Chevron Exxon Vs. Chevron: Exxon Wins By A Nose” and Exxon to Shell Exxon Vs. Shell: Exxon Wins By A Dividend.”

In this article, I will compare the two losers of the previous comparisons, Chevron and Shell.

1. Over the last 5 years, Chevron has consistently outperformed Shell

If we compare the charts we see that Chevron has outperformed Shell on both a 1-year and 10-year basis. But note both are down considerably from their previous highs but over the last 5 years, Chevron has pulled away.

Advantage Chevron.

2. On financial metrics, Chevron looks much better than Shell

Looking at key financial metrics, you can see that Chevron comes out on top in 4 out of 6 categories. And although Chevron has significantly higher FCF per share, it is somewhat offset by Shell’s higher CAPEX.

Chevron looks especially good in FCF and EBITDA, meaning it is a much more profitable company than Shell.

Advantage Chevron.

3. Shell’s share count goes up, Chevron’s goes down

Looking at share count, we can see that Shell’s has gone up and Chevron’s has gone down although modestly so.

Note Shell’s big share jump in 2016 when the company bought British Gas (BG) for about $50 billion. We’ll talk more about the Shell-BG hook up later in the article.

Advantage Chevron.

4. Chevron’s dividend continues to go up while Shell cuts its dividend

Oh boy, this is a big one. Chevron is one of the major oil companies to increase their dividend in the last year. As we just indicated, Shell cut its dividend after promising not to do so and even the Dividend Aristocrat Exxon is struggling to maintain its dividend.

That is pretty impressive in my estimation.

A big advantage to Chevron.

5. Shell’s zero-emission goals will limit profit potential

Whatever your opinion of renewable energy is, it does not have the potential to replace oil for decades (plural) and as such is not a viable business strategy vis a vis oil production.

So from strictly an investment viewpoint, I don’t see how Shell’s future business success can even approach its past or current business model.

Here are Shell’s plans:

We are working to offer customers more, lower-carbon products, from renewable electricity to hydrogen. We aim to reduce the carbon intensity of the energy products we sell by 30% by 2035 and by 65% by 2050 compared with 2016, keeping in pace with society.

This chart says it all.

A big part of the transition includes an emphasis on natural gas rather than oil. And renewable energy (including hydrogen), carbon capture, natural sinks (e.g. planting trees) and biofuels will lead the way.

None of those options will generate much, if any, revenue and profits from those ventures will be minimal or more likely, negative.

Advantage Chevron.

Conclusion:

According to my scorecard, Chevron wins with a shutout, 5-0.

Chevron remains a committed oil company while Shell appears to be transitioning to an emissions-free energy company.

There is a big difference for investors between investment in Chevron and investment in Shell – and that difference is profits and stock price. Chevron’s profits and stock price are certainly not guaranteed to go up but Shell’s is pretty well-guaranteed to go down more and up less than Chevron’s.

If you want to invest in the oil business, Chevron is a much better bet than Shell.

If you want to help the environment, buy Chevron, and use half the dividend to send a check to Friends of the Earth. You will still have a bigger dividend left than Shell’s even though you gave half of it away.

Plus you will own a better stock.

Win-win.

That would make more sense than buying Shell to help save the earth.

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Disclosure: I am/we are long CVX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

SOURCE

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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