Shell share price: what next as CEO says oil production has peaked?

Liam Roche
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Shell share price: what next as CEO says oil production has peaked?

Shell (LON:RDSB) has confirmed its oil production and carbon emissions have peaked as the company outlined its plans to move towards clean energy production.

In a statement on Thursday, the Anglo-Dutch company said it expects its oil output to decline by between 1% and 2% per year after peak production in 2019. Shell’s carbon emissions peaked in 2018, the statement added.

Ben van Beurden, chief executive of Royal Dutch Shell, outlined the company’s strategy moving towards net-zero carbon emissions.

“Our accelerated strategy will drive down carbon emissions and will deliver value for our shareholders, our customers and wider society,” van Beurden said.

“We must give our customers the products and services they want and need – products that have the lowest environmental impact. At the same time, we will use our established strengths to build on our competitive portfolio as we make the transition to be a net-zero emissions business in step with society.”

Shell share price

Shell’s share price opened 0.5% down on Friday morning at 1,326.6p following the company’s announcement. However, by mid-morning trade the share price bounced back above the previous day’s close of 1,332p.

It was only a matter of time before Shell made the announcement as it is increasingly becoming untenable for businesses to engage in fossil production. The markets have had some time to adjust to the inevitable news.

If other companies follow suit it will mean a drop in investment in exploration and production which will likely lead to higher oil prices.

This will be supportive of the Shell share price as Shell is only planning to reduce production by 1-2% and a rise in oil prices will more than offset this.

Since the turn of the year the Shell share price remains at a similar level despite moving up to 1,503.8p in January. However, over the past 12 months Shell’s share price has fallen significantly from 2,008p per share. Its highest point came in June 2018 when Shell shares were valued at 2,716p a piece.

Shell’s move to clean energy

Shell has said it will invest $6bn in renewable energy projects, in addition to pledging net zero carbon emissions by 2050, as the oil giant came under increasing pressure from investors. 

van Beurden said: “We want to be a leading power player, and the focus will be very much on selling clean power.

“Will we be producing the electrons ourselves? No. But a major player in power we will be.”

Advanced Oncotherapy: Democratising Proton Beam Therapy in cancer treatment

UK Investor Magazine
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Advanced Oncotherapy: Democratising Proton Beam Therapy in cancer treatment

The UK Investor Magazine Podcast was joined by Nicolas Serandour, CEO of Advanced Oncotherapy, to discuss the latest progress in democratising Proton Beam Therapy.

Nicolas explains the benefits of Proton Beam Therapy when compared to radiotherapy in treating certain forms of cancers and how Advanced Oncotherapy is setting out to make the treatment available to more patients.

There is also consideration paid to Advanced Oncotherapy’s revenue channels and recent technical trading update.

Royal Mail profits to soar as company reaps benefits of online shopping boom

Liam Roche
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Royal Mail profits to soar as company reaps benefits of online shopping boom

Royal Mail share price reaches highest point in over two years

Royal Mail raised its profit estimate for 2021 following a busy Christmas period for the postal service, a result of increased online shopping due to lockdowns.

While profit levels were initially expected at £400m, Royal Mail upped its forecast for end-of-year operating profits to “well in excess of £500m”.

The news caused Royal Mail shares to jump up by nearly 5% to a high of 450.75p. This came following a sharp drop to 124p in March 2020 as the first lockdown came into effect. 

The Christmas period, buoyed by pent-up demand as a result of the lockdowns, was the “busiest period in our company’s long history”, said Keith Williams, chief executive at Royal Mail. 

“The third quarter saw unprecedented parcel volumes in Royal Mail, driven by online shopping and the peak Christmas period,” said Williams.

Royal Mail has had to adapt to the transformation from being a postal service focused on delivering letters to more packages. The closure of shops deemed non-essential has seen a boom in e-commerce as people increasingly take their business online. 

As letter volumes fell by 14% and parcel numbers rose by 30%, Simon Thompson, formerly of Ocado, was brought in as chief executive to assist with the company’s modernisation. 

There have been disruptions to Royal Mail’s delivery service as the company makes its transition.

Keith Williams said Royal Mail had dealt with “unprecedented parcel volumes” during “challenging circumstances”.

“Given these record volumes, we recognise that at times our service during the period was not always as we would have wished,” he said. The company had made “encouraging progress” in rectifying those problems,” Williams added.

What is driving a potential commodities supercycle?

Liam Roche
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What is driving a potential commodities supercycle?

The commodities supercycle is underway. That is, according to Goldman Sachs and S&P Global. Commodity prices have already swung up as the world economy recovered from the pandemic and more is yet to come.

There are three key factors driving the commodities bull-run now and into 2021.

China

China is the leading consumer of a number of commodities, and with its ever-growing economic power, its demand is increasing. This phenomenon is responsible for pushing the price of a range of commodities to record-breaking levels in recent times.

China’s impressive recovery from the coronavirus pandemic is set to continue into 2021. The World Bank has forecasted a 7.9% growth rate for the country this year which means more demand for commodities and a surge in price.

US dollar inflation

Inflationary fiscal and monetary policies at an unprecedented level could contribute to a long-term rise in commodity prices. Long-term bond yields reached their highest level in thirty years this month in a sign that investors are expecting oncoming inflation. In this case investors are drawn towards commodities, such as precious metals or oil, which they deem a safe haven for investments during inflationary periods. 

Furthermore, as the US dollar is the world’s benchmark currency, it is used to price many commodities. A weaker dollar means lower prices for commodities. “The only way to get commodities moving in an inflationary, buying power way is a weaker dollar,” said Doug King, head of RCMA’s Merchant Commodity Fund.

Transition to green energy

Governments across the world are increasingly committed to green policies as they seek a way forward from the coronavirus pandemic. Accordingly, investors are turning away from fossils fuels and looking towards clean energy solutions. This means higher demand for the commodities involved in producing these new technologies. An example is the use of copper in the manufacturing process of electric cars. 

Mark Lewis, chief sustainability strategist at BNP Paribas Asset Management, said: “I’ve been in financial markets for 30 years now and I have never seen anything like it. It feels like any market you look at, investors want to buy.

The next three decades are “likely to bring a supercycle in investments in clean energy infrastructure, clean transportation and everything else that is required to make the green transition possible”, he said.

Three funds set to benefit from a commodities supercycle

Liam Roche
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Three funds set to benefit from a commodities supercycle

Goldman Sachs believes the economy is at “the beginning of a structural bull market for commodities”. The New York-based investment bank has even drawn comparisons to the 2000s copper boom when the price of copper quadrupled in line with increased demand in emerging markets, particularly China. 

With copper being one of the commodities tipped to lead the commodities supercycle, the selection of funds detailed provides a significant exposure to copper whilst ensuring a diversified approach in the natural resource sector.

There is also attention paid to recent comments from Shell that their own oil production has peaked which could see fossil fuel prices rise if other oil majors follow suit.

Below are three commodities funds which could stand to gain from a supercycle. There is a mix of passive and actively managed funds along with selections providing attractive yields.

JPM Natural Resources Fund

The JPM (JP Morgan) Natural Resources Fund’s holdings are well diversified across the commodities sector, as well as having a broad geographical distribution. 

The biggest exposure is in integrated oil and gas, with a weighting of 21.5%, which is actually 3.9% lower than the benchmark EMiX Global Mining and Energy Index. 

The fund is heavily overweight base metals compared to the benchmark with a weighting of 14.6%. This means the fund provides investors with a substantial holding in copper when compared to other diversified resource indices. 

Rio Tinto, is the top holding with a 6.3% weighting, while BHP, Chevron and Freeport-McMoRan make up 5.2%, 5% and 4.6% respectively. 

The fund’s dividend is paid annually and has a historic yield of 2.9%. The fund’s most recent and first dividend, of 19.14p, was paid on 30 April 2020.   

There is an ongoing charge for this fund of 0.82%. This includes the fund manager’s annual charge, as well as other expenses, but does not include transaction costs.

CQS Natural Resources Growth and Income (LON:CYN)

The CQS Natural Resources Growth and Income investment trust aims to provide capital growth and income from a portfolio of mining and resource equities, and fixed interest securities. 

A total of 18 sectors are represented by the trust, most of all gold and copper at 20.9% and 18.5% a piece. Shipping (9.6%) and fixed interest securities (7.8%) are third and fourth. Other sectors well represented by the investment trust are base metals, silver, uranium, and oil and gas.

The fund is equally well diversified by company, with 124 separate issues. First Quantum Minerals, which makes 80% of its revenue from copper, makes up 10.1% of the value of the fund. West Africa Holdings, Rea Holdings and Talon Metals make up the top four

The trust is trading at a discount to NAV of -11.72%, while its estimated NAV per share is at 152.93. Additionally, over the last 12 months the fund’s share price has risen by over 60p, an increase of 72.3%. 

The fund’s most recent dividend (1.26p) was an interim payment made on 30 November 2020. For the last seven years, annual dividend payments have remained fixed at 5.6p. The dividend is paid quarterly at a yield of 4.03%. 

The fund charges a 1.2% annual management fee.

Invesco Bloomberg Commodity UCITS ETF (LON:CMOP)

The Invesco Bloomberg Commodity UCITS ETF is a passive fund ETF which tracks the Bloomberg Commodity Index. Without targeting specific commodities through an actively managed approach, the fund will benefit from a rise of commodities universe.

The index dropped to 1008.25p per share in April 2020, but has recovered well, climbing up to 1285p per share in February 2021.

Due to its passive style of investing, the ETF has a management fee of 0.19%, which is considerably lower than the aforementioned funds.

FTSE 100 jumps before falling back in line

Liam Roche
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FTSE 100 jumps before falling back in line

The FTSE 100 bounced up to over 6,550 in early morning trade on positive announcements from some of the index’s flagship companies today. Upbeat reports from AstraZeneca, Coca-Cola HBC and RELX each disclosed optimistic outlooks for the coming year. By mid-morning the index had retreated back down towards yesterday’s closing levels in a continuation of recent sideways movements. 

Russ Mould, investment director at AJ Bell, drew attention to some underlying dynamics keeping the FTSE 100 pinned back. 

“The FTSE 100 has now been treading water for more than a week as strong sterling weighs on the large number of index members which earn in different currencies. Markets across Europe and Asia were also static on Thursday with investors sitting on their hands, waiting for progress updates on the US stimulus plan and vaccination numbers,” Mould said.

“On the UK market, healthcare and industrials did their best to spur the FTSE 100 forward but the index was held back by investors not being convinced by Royal Dutch Shell’s strategy update. Weakness among banks also weighed on the index.”

FTSE 100 movers

At mid-morning trade, Intertek (3.4%), Coca-Cola (3.25%) and Just Eat (3.06%) were the biggest risers on the FTSE 100.

Down at the bottom of the FTSE 100, Natwest (-2.64%), International Consolidated Airlines (-2.42%) and Land Securities (-2.16%) are the day’s biggest fallers so far.

AstraZeneca

AstreZeneca’s share price jumped by nearly 2% to 7,386p at market opening following news that the pharmaceutical company surpassed its Q4 earnings expectations.

AstraZeneca also announced it would be speeding up its process of developing a vaccine adapted to the new variants of Covid-19.

Coca-Cola HBC

The soft drinks company posted a dip in profit levels for 2020 as sales were hit by lockdowns’ impact on bars and restaurants. 

Despite the drop, Coca-Cola HBC was one of the day’s top performers on the FTSE 100 based on its forecast of a strong recovery in 2021.

Glencore 2020 full year results preview

Liam Roche
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Glencore 2020 full year results preview

Glencore set to profit from hike in commodity prices

All eyes will be on Glencore on Tuesday as the mining company announces its full results. 

With hype swirling of an oncoming commodities supercycle, and questions over the company’s handling of the coronavirus pandemic, Glencore’s report will go some way to clearing things up. 

In the same way a drop off in demand for commodities harmed Glencore throughout the pandemic, a price recovery could have a positive impact on the company’s future prospects.

Over the course of 2021, and even the next decade, commodity prices look set to sky-rocket.

Goldman Sachs has likened “structural forces” to those which drove commodities prices up in the 2000s. 

While Will Ryder, equity analyst at Hargreaves and Lansdown, highlighted the dramatic differences between commodity prices in the first and second half of the period. 

“Glencore had a tough first half in 2020 as lower commodity prices led the group to write down the value of some assets and drove a $2.6bn loss. However, key commodity prices have since jumped, so we expect the group to have had a better second half,” said Ryder.

“While last year’s strong rebound in many commodity prices might be viewed as a “V-shaped vaccine recovery”, the bank contends it is just “the beginning of a much longer structural bull market for commodities”.

A question mark also remains over the prospect of a dividend payment or lack thereof ahead of Glencore’s full year results. 

The mining giant scrapped its previous shareholder payout on account of the damaging impact of the coronavirus on its balance sheet.  

Glencore last paid a dividend of 10 cents per share on 24 September 2019. 

Will Ryder feels the decision will depend on whether or not Glencore has been able to service its debts over the past two months. 

“Dividends have been shelved until the group sorts its balance sheet out, which means reducing net debt to below $16bn,” said Ryder. 

“Management thought they would sort it out by the end of 2020, suggesting dividends could return this year. However, nothing is guaranteed and it will be worth reading management’s comments with care.”

AstraZeneca share price rises as Q4 earnings surpass expectations

Liam Roche
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AstraZeneca share price rises as Q4 earnings surpass expectations

AstraZeneca profits double to $3.2bn

AstraZeneca, the British maker of one of the coronavirus vaccines, announced its profits doubled to $3.2bn on Thursday on account of strong sales of other medicines. 

Q4 earnings more than tripled following a robust performance by its cancer drugs, surpassing the company’s expectations. Drug sales rose by 11% to $7.41bn.

AstraZeneca’s share price jumped by nearly 2% to 7,386p in mid-morning trade on Thursday following news of the company’s end of year results. Astrazeneca had a closing low of 6,227p on 16 March 2020 following the sell-off due to coronavirus.

Sebastian Skeet, senior analyst at Thirdbridge, praised AstraZaneca’s performance throughout the pandemic. 

“The company is arguably the poster child for big pharma turnarounds, with CEO Pascal Soriot rebuilding the pipeline and establishing the necessary growth drivers. This is exemplified by AstraZeneca’s recent performance. which demonstrated double digit revenue growth, improved profitability and core EPS growth of 18% at constant exchange rates.”

AstraZeneca’s financial report does not include revenue generated by its Covid-19 vaccine which it has committed to supply on a not-for-profit basis throughout the pandemic. The company will be reporting its sales figures separately at the beginning of Q2.

AstraZeneca also announced it would be speeding up its process of developing a vaccine adapted to the new variants of Covid-19. 

Pascal Soriot, chief executive of Astrazeneca, outlined the various challenges faced by the company during the past year. 

“The performance last year marked a significant step forward for AstraZeneca. Despite the significant impact from the pandemic, we delivered double-digit revenue growth to leverage improved profitability and cash generation,” said Soirot. 

“The consistent achievements in the pipeline, the accelerating performance of our business and the progress of the COVID-19 vaccine demonstrated what we can achieve, while the proposed acquisition of Alexion is intended to accelerate our scientific and commercial evolution even further.” 

While the world’s eyes remain glued to updates on vaccines, Astrazeneca has been making strides in new geographical and healthcare markets. 

“Additional investment in new medicines continued to fuel our rapidly growing oncology and biopharmaceuticals therapy areas. Tagrisso‘s future was enhanced with its first regulatory approval in early, potentially-curable lung cancer and further national reimbursement in China in advanced disease,” said Pascal Soirot. 

“Farxiga again expanded its potential beyond diabetes, while tezepelumab promised real hope for patients suffering from severe asthma. Thanks to the focus on an industry-leading pipeline and consistent execution, I am confident that we will continue to deliver more progress for patients and sustained, compelling results.”

RELX raises dividend on positive outlook

Liam Roche
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RELX raises dividend on positive outlook

Exhibition business struggles throughout pandemic

Relx Group announced on Thursday it will hike its dividend by 3% to 47p after a forecasted return to pre-pandemic profit levels. 

The news comes despite its exhibition business posting losses as a result of Covid-19. Exhibition, a leading global events business within RELX, saw its revenues fall sharply by 71% to £362m over the course of 2020, as people across the world were no longer able to congregate in large groups. 

The company’s other areas of focus, STM (Scientific, Technical and Medical), risk and legal saw small profit rises as they performed relatively well over 2020. 

As a whole, RELX posted £7.1bn revenue, a 10% fall compared to 2019. Its pre-tax profit also dropped by 13% to £1.9bn. 

RELX’s share price was up on early Thursday morning trade by 1.8% to 1,805p.

RELX chairman, Anthony Habgood, said the decision to raise the shareholder payout reflected an optimistic outlook moving forward. 

“Earnings per share is currently being impacted by Covid-19 related disruption to our exhibitions business, but we are proposing a 3% increase in the dividend to 47.0p reflecting our consistent track record and our confidence in the outlook for the company,” Habgood said.

Habgood also stated that the company is well positioned to allow for a smooth transition as he makes way for the incoming chairman, Paul Walker. 

“I believe that overall the company is well positioned managerially, financially and strategically as I prepare to hand over the Chair to Paul Walker in March,” Habgood said. 

“Paul’s strong record of value creation, deep understanding of corporate governance, and extensive international experience in sectors relevant to RELX’s business, make him ideally suited to the role of Chair, and I am confident that RELX will continue to prosper under his stewardship.”

Three London-listed shares set to benefit from rising copper prices

Liam Roche
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Three London-listed shares set to benefit from rising copper prices

Copper prices surged towards the end of 2020 and into the new year, reaching $3.696 per pound, the commodity’s highest level since 2013. The recent gains built on a steady rally through 2020 as the price of copper recovered from a sharp fall below $2,000 upon lockdowns coming into effect worldwide.

As the global economy recovers from the pandemic, there are plenty of reasons to believe there is more to come for the industrious metal as analysts make favourable predictions.

One of the foremost drivers in copper’s dynamics is the transition from internal combustion engine vehicles to electric cars. The demand for copper is set to rise accordingly. 

Logically, the price looks set to follow suit. The Copper Alliance has projected a 50% increase in demand for copper over the next 20 years. Similarly, Morgan Stanley strategists have said copper is “ticking all the boxes for a bull run in 2021”, predicting a potential 30% upside to its value. 

This presents a wealth of opportunity for London-listed suppliers of copper. Three in particular are currently undervalued by the stock market.

Antofagasta (LON:ANTO)

The FTSE 100 Chile-based mining company focuses on copper and its by-products and has a market cap of over £15bn. Antofagasta’s revenue, according to its last released financial report in August 2020, was £2.14bn. 

Antofagasta is preparing for the oncoming surge in demand for the brown metal by expanding its supply capacity. As of January the expansion of the Los Pelambres project is 45% complete. Following restrictions due to Covid-19 the project initially was delayed.

However, it restarted in August with completion now expected in early 2022. Once in full operation, the expansion will add 60,000 tonnes of copper a year to overall production. Antofagasta expects its copper production levels to reach 730,000-760,000 tonnes in 2021 as operating efficiency at the company’s mines “remains high”.

Since the beginning of the year, Antofagasta’s share price has seen modest gains, up to 1,544p from 1,502p.

Central Asia Metals (LON:CAML)

Listed on the AIM, Central Asia Metals (CAML) is a diversified company that, in addition to its copper operations, runs zinc and lead mines. Smaller in size than Antofagasta, the company has a  £412m market capitalisation. 

Despite rebounding back from its March low of 114p, by over 100%, to 239.5p, CAML is still undervalued. According to research by VSA Capital, CAML continues to trade at a discounted price of 10% and 6% based on 2020 and 2021 end of year EV/EBITDA multiples.

VSA Capital has put forward a Buy recommendation and set its target price for the stock at 285p. This represents an 18% increase on the stock’s current value.

CAML’s 2021 production guidance for copper is between 12,500 and 13,500 tonnes.

BHP (LON:BHP)

BHP is the world’s largest miner with a market cap of £105.3bn. The company produces a variety of commodities, including iron ore, nickel and copper.

Around the beginning of 2021, BHP set the wheels in motion to further increase production levels. The company is moving ahead with the $2.5bn expansion of its Spencer copper mine in Chile after Covid-19 put the renovation on hold.

This will further its capacity into 2021 as demand levels pick up momentum. The miner’s copper production forecast for 2021 is between 1.5m and 1.65m tonnes.

BHP’s revenue over 2020 dipped slightly to $42.9bn from 2019 when it was at $44.3bn. BHP’s share price is up so far in 2021 to 2,117.5p from 2,035p.

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