Please ensure Javascript is enabled for purposes of website accessibility

Why Royal Dutch Shell plc’s Stock Soared 10% in April

By Matthew DiLallo – May 4, 2018 at 3:27PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Several catalysts fueled the big oil giant’s double-digit jump last month.

What happened

Shares of Royal Dutch Shell plc (RDS.A) (RDS.B) jumped double digits in April, thanks to several positive catalysts including higher oil prices and strong first-quarter results.

So what

Crude oil continued rebounding in April. The global oil benchmark, Brent, led the way, rising 7.7% for the month and closing just under $75 a barrel. This pushed it further above the U.S. benchmark, WTI, after it only rose 5.6% for the month, to nearly $69 a barrel.

Several factors fueled the rise in crude prices, including continued strong demand, high compliance by OPEC on its production cuts, and growing concerns of new sanctions on Iran. Those higher oil prices suggest oil producers like Royal Dutch Shell will make even more money in the coming quarters.

An offshore drilling rig at sunset.

Image source: Getty Images.

That optimistic outlook comes amid an already impressive streak of strong earnings reports by Shell, which was no different in the first quarter. The oil giant announced those numbers in April, which showed that it produced $5.9 billion in net income, well ahead of both the year-ago and prior-quarter's results. The company achieved those strong earnings by growing production to 3.84 million barrels of oil equivalent per day (BOE/D) -- up 80,000 BOE/D from the fourth quarter -- while also reducing costs.

Another highlight in April was that Shell gave the green light to the Vito project, which is a joint venture with Statoil (EQNR 0.21%) in the Gulf of Mexico. Shell and Statoil were able to cut that project's cost estimate by 70% from the original design so that it's now profitable at $35 a barrel. The partners expect the project to produce 100,000 BOE/D of low-cost oil and gas when it comes online in 2021.

Now what

Royal Dutch Shell is firing on all cylinders these days. The company spent the better part of the past few years restructuring its business so that it could grow profitably, even if crude stayed below $60 a barrel. Because of that, it's now cashing in with oil in the $70s.

Meanwhile, with the potential for oil prices to continue improving, and low-cost production from new projects like Vito in the pipeline, Royal Dutch Shell looks like an oil stock to consider holding for the long haul -- even after April's big move -- especially by those seeking dividend income.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Statoil ASA Stock Quote
Statoil ASA
$33.11 (0.21%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.