1. Royal Dutch Shell Mannely Goncalves, Nguyet Ly, Jamila Panpinij, Anna Rausa

2. Company Description ●Production of oil and natural gas. ●Shell operates in three distinct segments including: Upstream, Downstream, and Corporate. ●90,000 employees in more than 80 different countries and territories. ●Shell produces 3.3 million barrels of oil equivalent every day. ●44,000 Shell service stations worldwide. ●30+ refineries and chemical plants.

3. StrengthsWeaknesses Strong market position Vertically integrated operations Strong exploration technological capability Strong research & development capabilities Violation of anti-corruption laws Legal proceedings against Shell for oil spills in Nigeria OpportunitiesThreats Expanding GTL technology Expansion of the Motiva Port Arthur refinery The Prelude floating liquefied natural gas (FLNG) partnership Impact of shale gas development on the Shell LNG business Investments in Iran and Syria Risks associated with wide geographic presence Fluctuating prices of crude oil, natural gas, oil products, and chemicals SWOT Analysis

4. Ratio Analysis Liquidity, Profitability, and Asset Management

8. Firm Valuation: DDM ●P o = D o (1+g) / (r - g) ●D o = $1.72 (as reported in Shell’s 2012 annual report) ●Constant growth rate = 2.1% o expected growth rate from 2014 - 2020 (from Forbes)

9. Shell’s Dividend Growth Rate ●Ways of estimating g: o researched the rates predicted by different financial analysts o analyzed the company’s potential for growth in the future o calculated the dividend growth rate by computing the growth rates over the past nine years o using the formula g = ROE * plowback ratio

10. Rates from Different Reports ●Stock Analysis on Net = 7.38% ●Motley Fool = 2.33% ●Bloomberg = 2.67% ●Yahoo Finance = 4.70% ●Morning Star = 4.61%

11. Company’s Potential for Growth ●Shell’s strategy for 2013: o increase investments in new engines, explorations, and drillings o expand into new territories o seek out new growth opportunities o expected to bring in $33 billion of net capital investment in 2013 (compared to the $30 billion of net capital investment in 2012)

12. YearDPSDividend Growth Rate 20121.722.38% 20111.680.00% 20101.680.00% 20091.685.00% 20081.611.11% 20071.4413.39% 20061.2712.39% 20051.135.61% 20041.07

13. g = ROE * plowback ratio ●most recent ROE (from Yahoo Finance) = 11.67% ●plowback ratio o DPS from 2012 = 1.72 o EPS from 2012 = 4.25 ●g = 0.1167 * [ 1 - (1.72/4.25)] = 6.95%

14. Estimation of g ●g ranges widely from 0% to 13.39% ●We estimated g to be 5% o Based on SWOT analysis and analysis of firm’s riskiness o No increase in g for 3 years in a row until 2012

15. CAPM: r = r RF + (RP m )β i ●r RF = 3.81% (30-year U.S. Treasury Bond Yield) ●RP m = 5% (as recommended in class) ●β i = 1.042097 ●r = 0.09 = 9%

16. Shell’s Valuation using DDM ● P o = D o (1+g) / (r - g) o D o = 1.72 o g = 5% o r = 9% o g = 2.1% ● P o = $26.17

17. Firm Valuation: Using Multiples (Royal Dutch Shell’s “most recent” Earnings/Share)(Industry P/E ratio) (6.74)(9.20)= $62.01