The Royal Dutch Shell Company Analysis

The Royal Dutch Shell Company analysis 2

Date
Prepared by:

The Royal Dutch Shell Oil Company commonly known as Shell is a multinational Oil and gas company that provides petroleum products, natural gas and oil throughout the world. This multinational energy and petrochemical company is well established in more than 100 countries and has more than 90,000 employees in these countries and territories. The Anglo-Dutch multinational company is headquartered in Netherlands and it started when Royal Dutch Petroleum and UK-based Shell Transport & Trading amalgamated in year1907, to end their long rivalry in the market. In terms of revenue, it is the seventh largest company as of 2016. The company carries out oil production, exploration, distribution, refining,  and marketing of petrochemicals. Recently it ventured into power generation using renewable energy methods like using biofuels and wind.
The company is always motivated to meet and provide the energy needs to its customers in a way that is viable environmentally, economically and socially. The company’s main objective are to engage in the oil, gas, chemicals and other selected business in an efficient, responsible but yet profitable way that meets the ever changing customer’s needs (“Shell Global”, 2016). The purpose of this paper will be conducting a financial analysis of the company for the last five years.

(refer to the attached table)

The revenue increases from 2010 to 2014 with a percentage increase of 14.41%. However the operating profits reduced from year 2010 from US$ 25,497 million to US$18,840 million in 2014 with a loss of 26.11%. The net income also dropped from year 2010 to year 2014 from US$ 20,474 to 14, 730 million respectively with a drop of 28%. The decrease in operating profits and income is due to the reduction in oil prices globally. The increase in revenue can be because of the increase in the range of products the company deals with hence diversifying its risks and they include natural gas.
Definition of important terms
Revenue refers to the total amount of finances acquired during the stated financial period and it is got from goods sold, services offered, or other activities that are run for the purpose of bringing money to the company
Operating income refers to the net result for the given financial period after deducting operating expenses from operating revenues. Income before taxation is the operating profit and non-operating income (expense) sum before other deductions such as income (loss) from extraordinary items, income taxes, equity method investments among other expenses.
Income for the period refers to the profit or loss for the given financial period, net of income taxes and symbols the final profit or loss for a company.

Future of Shell
Both Shell and Exxon Mobil are involved in oil and gas exploration and production as well as marketing their products, however, Exxon remains the strongest in the business since it has high profits. The company has the highest net income as well as the revenue sales due to its huge presence globally. Shell has the ability to recover from short and long term liabilities as analyzed in the attached financial table.
Threats
High Competition. Some companies such as Exxon Mobil are a great competitor for the company since it is well established and produces more oil barrels as well as enough natural gas for sale per day globally. It has an equal global establishment almost like The Royal Shell Dutch Company hence likely to tap the company’s market in some areas where Shell is not well established (Sluyterman, 2010).
Opportunity
The company has a strong brand name and hence has a high market stake globally. Moreover, it has some of the great fuel products such as Shell V power which is well known and hence a potential source for its markets. More so the diversification of products has made it reach a more wide market and hence the strong potential export market (Sluyterman, 2010).

Weakness
Fraudulent investments and bribery cases. Royal Dutch Shell Company has been accused of bribing a former Nigerian minister $1.1bn for the deal for oil block OPL 245 in the year 2011. This is unethical and also a violation of international policies on providing fair opportunity for all investors in the whole world (“Nigerian Probes Uncover $12bn Oil Fraud”, 2015).
Recommendations
From the financial data collected and compared to Exxon Mobil, even though Exxon is a tough competitor of Shell, Shell remains a choice for many investors. The company has the ability to be long term solvent and the activity ratio clearly indicate that RDSA is very effective in its business as well as very profitable. The good and steady dividends from company’s leverage ratio gives confidence in short-term profit making investors.

References
Frynas, J. (2003). Royal Dutch/Shell. New Political Economy, 8(2), 275-285. http://dx.doi.org/10.1080/13563460307169
Hennchen, E. (2014). Royal Dutch Shell in Nigeria: Where Do Responsibilities End?. J Bus Ethics, 129(1), 1-25. http://dx.doi.org/10.1007/s10551-014-2142-7
Jefferson, M. & Voudouris, V. Oil Scenarios for Long-Term Planning: Royal Dutch Shell and Generative Explanation, 1960-2010. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.1949943
Nigerian Probes Uncover $12bn Oil Fraud. (2015). Royal Dutch Shell plc .com. Retrieved 15 May 2016, from http://royaldutchshellplc.com/2015/11/10/nigerian-probes-uncover-12bn-oil-fraud/
Shell Global. (2016). Shell.com. Retrieved 15 May 2016, from http://www.shell.com/
Sluyterman, K. (2010). Royal Dutch Shell: Company Strategies for Dealing with Environmental Issues. Business History Review, 84(02), 203-226. http://dx.doi.org/10.1017/s0007680500002580
Staff of Caribbean Petroleum Compan,. (1948). Oil Fields of Royal Dutch-Shell Group in Western Venezuela. Bulletin, 32. http://dx.doi.org/10.1306/3d933b60-16b1-11d7-8645000102c1865d
The Shell global scenarios to 2025. (2005). London, England.
www.exxonmobil.com