Royal Dutch Shell Debt jumped on 58.4% in 2016 and Net Debt / EBITDA jumped on 1.5x from 1.1x to 2.7x
02 Feb 2017 • About Royal Dutch Shell (
$RDSB) • By InTwits
Royal Dutch Shell reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Royal Dutch Shell is a company in decline: 2016 revenue growth was -11.8%, 5 years revenue CAGR was -13.1%
- Royal Dutch Shell has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.6%. At the same time it's a lot of higher than industry average of 14.1%.
- CAPEX is quite volatile: 27,421 in 2016, 25,019 in 2015, 12,232 in 2014, 10,772 in 2013, 11,290 in 2012
- The company has potentially unprofitable business model: ROIC is at 0.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Royal Dutch Shell ($RDSB) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 467,153 | 451,235 | 421,105 | 264,960 | 233,591 | -11.8% |
| Gross Profit | 71,213 | 69,650 | 63,789 | 42,221 | 42,583 | 0.9% |
| SG&A | 14,465 | 14,675 | 13,965 | 11,956 | 12,101 | 1.2% |
| EBITDA | 52,337 | 48,379 | 44,378 | 23,453 | 27,360 | 16.7% |
| Net Income | 26,712 | 16,371 | 14,874 | 1,939 | 4,575 | 135.9% |
Balance Sheet
|
|---|
| Cash | 18,550 | 9,696 | 21,607 | 31,752 | 19,130 | -39.8% |
| Short Term Debt | 7,833 | 8,344 | 7,208 | 5,530 | 9,484 | 71.5% |
| Long Term Debt | 29,921 | 36,218 | 38,332 | 52,849 | 82,992 | 57.0% |
Cash flow
|
|---|
| Capex | 32,576 | 40,145 | 31,854 | 26,131 | 22,116 | -15.4% |
Ratios
|
|---|
| Revenue growth | -0.6% | -3.4% | -6.7% | -37.1% | -11.8% | |
| EBITDA growth | -6.4% | -7.6% | -8.3% | -47.2% | 16.7% | |
| Gross Margin | 15.2% | 15.4% | 15.1% | 15.9% | 18.2% | 2.3% |
| EBITDA Margin | 11.2% | 10.7% | 10.5% | 8.9% | 11.7% | 2.9% |
| Net Income Margin | 5.7% | 3.6% | 3.5% | 0.7% | 2.0% | 1.2% |
| SG&A, % of revenue | 3.1% | 3.3% | 3.3% | 4.5% | 5.2% | 0.7% |
| CAPEX, % of revenue | 7.0% | 8.9% | 7.6% | 9.9% | 9.5% | -0.4% |
| ROIC | 17.2% | 11.9% | 8.8% | -1.5% | 0.9% | 2.4% |
| ROE | 15.5% | 9.2% | 8.5% | 1.2% | 2.6% | 1.5% |
| Net Debt/EBITDA | 0.4x | 0.7x | 0.5x | 1.1x | 2.7x | 1.5x |
Revenue and profitability
The company's Revenue dropped on 11.8% in 2016. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.9 pp from 8.9% to 11.7% in 2016.
Gross Margin increased on 2.3 pp from 15.9% to 18.2% in 2016. SG&A as a % of Revenue increased slightly on 0.67 pp from 4.5% to 5.2% in 2016.
Net Income marign increased slightly on 1.2 pp from 0.73% to 2.0% in 2016.
Capital expenditures (CAPEX) and working capital investments
Royal Dutch Shell's CAPEX/Revenue was 9.5% in 2016. Royal Dutch Shell showed small growth in CAPEX/Revenue of 0.57 pp from 8.9% in 2013 to 9.5% in 2016. It's average CAPEX/Revenue for the last three years was 9.0%.Battling declining revenue the company invested a large share of EBITDA (80.8%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (0.94%) and ROE (2.62%). ROIC increased on 2.4 pp from -1.5% to 0.94% in 2016. ROE increased slightly on 1.5 pp from 1.2% to 2.6% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.7x and Debt / EBITDA is 3.4x. Net Debt / EBITDA jumped on 1.5x from 1.1x to 2.7x in 2016. Debt surged on 58.4% in 2016 while cash dropped on 39.8% in 2016.
Valuation
The company's trades at EV/EBITDA 2.7x and P/E 0.2x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 14.2x with the industry average at 19.0x.
Appendix 1: Peers in Oil & Gas Producers
Below we provide Royal Dutch Shell benchmarking against other companies in Oil & Gas Producers industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cadogan Petroleum ($CAD) | -46.1% | 0.3% | 764.9% | 131.2% | |
| Eland Oil & Gas ($ELA) | | | | 54.8% | |
| Zoltav Resources Inc ($ZOL) | | | | 40.6% | |
| Novatek OAO ($NVTK) | 19.8% | 41.3% | 20.0% | 32.9% | |
| AO Tatneft ($ATAD) | | 2.5% | 4.7% | 16.0% | |
| |
|---|
| Median (38 companies) | 12.8% | 4.3% | 0.5% | -19.5% | -33.3% |
|---|
| Royal Dutch Shell ($RDSB) | | -3.4% | -6.7% | -37.1% | -11.8% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Bankers Petroleum Ltd ($BNK) | 77.5% | 81.1% | 80.8% | 72.2% | |
| Serica Energy ($SQZ) | | | | 67.0% | |
| Oil & Gas Development Co ($OGDC) | 69.9% | 70.9% | 68.5% | 62.7% | 54.0% |
| Nighthawk Energy ($HAWK) | 38.8% | 66.8% | 58.1% | 49.8% | |
| Caza Oil & Gas Inc ($CAZA) | 0.1% | 30.5% | 40.8% | 44.8% | |
| |
|---|
| Median (23 companies) | 18.3% | 21.7% | 16.3% | 11.6% | -44.2% |
|---|
| Royal Dutch Shell ($RDSB) | 15.2% | 15.4% | 15.1% | 15.9% | 18.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Great Eastern Energy Corp ($GEEC) | 61.2% | 64.1% | 70.4% | 66.5% | 50.0% |
| Oil & Gas Development Co ($OGDC) | 73.7% | 65.9% | 69.3% | 62.4% | 55.0% |
| Serica Energy ($SQZ) | | | | 61.3% | |
| Circle Oil ($COP) | 53.5% | 54.8% | 51.1% | 53.0% | |
| Caza Oil & Gas Inc ($CAZA) | -50.7% | -3.0% | 47.7% | 49.8% | |
| |
|---|
| Median (39 companies) | 17.2% | 20.6% | 16.5% | 21.8% | 11.9% |
|---|
| Royal Dutch Shell ($RDSB) | 11.2% | 10.7% | 10.5% | 8.9% | 11.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| President Energy ($PPC) | 51.5% | 24.6% | 10.4% | 142.7% | |
| Ruspetro ($RPO) | 139.8% | 55.2% | 77.2% | 80.3% | |
| Parkmead Group(The) ($PMG) | 6.4% | 85.4% | 39.8% | 67.4% | 6.1% |
| Bankers Petroleum Ltd ($BNK) | 64.1% | 50.0% | 58.7% | 47.3% | |
| Volga Gas ($VGAS) | | | 14.0% | 45.5% | |
| |
|---|
| Median (39 companies) | 17.7% | 24.6% | 16.5% | 16.5% | 5.9% |
|---|
| Royal Dutch Shell ($RDSB) | 7.0% | 8.9% | 7.6% | 9.9% | 9.5% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Turkiye Petrol Rafinerileri A.S. ($TPRD) | 13.6% | 5.8% | 5.3% | 25.4% | |
| Oil & Gas Development Co ($OGDC) | 46.7% | 40.4% | 39.7% | 24.3% | 14.1% |
| AO Tatneft ($ATAD) | 19.2% | 19.1% | 17.8% | 19.7% | |
| Novatek OAO ($NVTK) | 21.7% | 29.0% | 21.2% | 19.4% | |
| Serica Energy ($SQZ) | -6.2% | -5.1% | -5.5% | 19.4% | |
| |
|---|
| Median (39 companies) | 4.2% | 4.1% | 5.2% | 1.8% | -0.8% |
|---|
| Royal Dutch Shell ($RDSB) | 17.2% | 11.9% | 8.8% | -1.5% | 0.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Jubilant Energy N.V. ($JUB) | 77.9x | 38.8x | 44.6x | 192.7x | |
| Ruspetro ($RPO) | 369.1x | 34.8x | 27.9x | 116.8x | |
| Iofina ($IOF) | -5,718.9x | | | 32.8x | |
| Edge Resources Inc ($EDG) | | | 8.0x | 7.6x | |
| BP ($BP.A) | 1.1x | 0.6x | 1.3x | 4.0x | |
| |
|---|
| Median (30 companies) | 0.5x | 0.7x | 1.3x | 1.7x | 3.1x |
|---|
| Royal Dutch Shell ($RDSB) | 0.4x | 0.7x | 0.5x | 1.1x | 2.7x |
