ROYAL DUTCH SHELL PLC(RDSB.L)：MUSINGS FOR A NEW CEO

Deutsche Bank Markets Research Rating Hold Europe United Kingdom Oil & Gas Integrated Oils Company Royal Dutch Shell Plc Date 20 January 2014 Company Update Musings for a new CEO Reuters Bloomberg Exchange Ticker RDSb.L RDSB LN LSE RDSb ADR Ticker ISIN RDS.B US7802591070 Forecasts And Ratios Year End Dec 31 2011A2012A2013E2014EDB EPS (USD) 3.974.023.113.44% Change 0.0%0.0%-4.7%-1.8%P/E (x) 8.88.911.910.7Dividend Yield (%) 4.84.84.95.1Source: Deutsche Bank estimates, company data Enough to get off the hook but not to release the value ________________________________________________________________________________________________________________Deutsche Bank AG/London Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 054/04/2013. Price at 15 Jan 2014 (GBP) 2,256.00Price Target (GBP) 2,400.0052-week range (GBP) 2,365.00 - 2,077.50 Lucas Herrmann, ACA Research Analyst (+44) 20 754-73636 lucas.herrmann@db.com Mark Bloomfield, ACA Research Analyst (+44) 20 754-57905 mark.bloomfield@db.com Price/price relative 1600180020002200240026001/117/111/127/121/137/13Royal Dutch Shell PlFTSE 100 INDEX (Rebased) Performance (%) 1m3m12mAbsolute 6.06.63.5FTSE 100 INDEX 4.53.711.7Source: Deutsche Bank Comparatives Royal Dutch Shell plc (RDSa.L),GBP2,195.00 Hold 2012A 2013E2014EDB EPS (USD) 4.02 3.263.50P/E (x) 8.6 11.010.2EV/EBITA (x) 4.0 6.14.4Source: Deutsche Bank Shell: RoCE (%) and capem ($bn) by business -0.4%19.6%18.0%-4.5%16.8%12 .5%-10. 0%-5.0%0. 0%5. 0%10. 0%15. 0%20. 0%25. 0%0.010. 02 0.030. 040. 050.060 .070. 080. 0201 3E RoCE %2013E CAPEM $bnUpst ream AmericasI nte grated gasUpst ream I nt'lO il Produ ct sChemi ca lsMarketi ng & tradi ngSource: Deutsche Bank After two awful years for the shares 2014 has all the ingredients for improvement. The emergence of a new CEO certainly allows for change and with targets for production disbanded and ‘mea-culpa’ called on an over-aggressive and value destructive expansion in US unconventional, only the cash flow targets remain to be torched – likely in our view with the final 2013 results. To the extent that Shell starts to talk capital restraint investors will no doubt respond favourably. The mind set is, after all, that spend at Shell is out of control. But absent more aggressive portfolio action we struggle to see that this is enough to drive a material change in forward returns. Hold. Greater focus on capital discipline a start With its recent profit warning adding further impetus it is easy to think that everything will be improved given confirmation of greater capital discipline under a new CEO. We do not doubt its importance. Yet with its Americas growth strategy – the home for 50% of past investment – woefully under-delivering under the weight of dead capital and refining a continuing thorn, Shell needs to push further and deeper if the true value of its Integrated Gas portfolio is to emerge in the share price. Corporate change could release huge value – using the industrial gas majors as a proxy it is not hard to see Shell’s integrated gas operations alone attract a market valuation of towards $170bn. But do we really believe Shell will change the model or that its income focused shareholders are ever likely to carry sufficient sway to force such an approach? OCF should show improvement – but the real kicker comes later Capex plans aside the challenge as we see it for performance over the near term is quite how competitive any growth in operating cash flow will be? Start-ups in the US GoM and the addition of the Repsol LNG trading assets will help. But the key Australian LNG driven uplift doesn’t really commence until H2 2015. With this in mind, absent genuine signs of a material shift in management’s approach towards both its portfolio and, very importantly, the position of its investors on the stakeholder ladder and, short term trading upside aside, it feels too early to turn more positive at this time. Valuation & Risk On reduced EPS following dreadful Q4 ‘13 guidance (see p.29) the shares look supported by yield. Abse