SHEL
SHEL
Hold 2026-03-15
Model
DDM
Price at Report
$89.43
Base IV
$82.61
Bear IV
$64.37
Bull IV
$111.60
Entry Zone: 68-76 · Sell Above: 95
Bore Family Office
Valuation Report — Shell plc (SHEL) • March 15, 2026
3-Stage DDM (Ke) • Discount Rate: 6.50% • Current Price: $89.43
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Shell plc is one of the world's largest integrated energy companies, operating across upstream oil and gas exploration and production, downstream refining and chemicals, LNG liquefaction and trading, and a growing renewables and energy solutions segment. Headquartered in London and listed on the NYSE (ADR), Shell has operations in more than 70 countries and produces approximately 2.9 million barrels of oil equivalent per day.
Shell has repositioned as a "high-value, lower-carbon" energy company under CEO Wael Sawan, focusing capital on highest-return oil and gas assets, aggressively expanding LNG infrastructure (the world's largest LNG trader), and reducing lower-return renewables exposure. The company generated $23.9B in FCF in FY2025 despite lower oil prices, demonstrating improved capital discipline and a leaner cost structure post-restructuring. Strong net cash position ($21.1B) provides significant balance sheet optionality.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Integrated Gas (LNG) | $51,200M | 19% | +5.0% | — | LNG production, trading; highest-margin segment |
| Upstream (E&P) | $38,100M | 14% | -8.0% | — | Oil & gas production; volume decline, value focus |
| Marketing (Retail) | $95,400M | 36% | -4.0% | — | Fuel retail, lubricants, EV charging |
| Chemicals & Products | $55,900M | 21% | -10.0% | — | Refining, chemicals; undergoing portfolio rationalization |
| Renewables & Energy Sol. | $26,300M | 10% | +12.0% | — | Power, trading, low-carbon products |
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $261,504 | $381,314 | $316,620 | $284,312 | $266,886 |
| EBITDA ($M) | $49,204 | $81,638 | $62,027 | $56,864 | $52,881 |
| Operating Income ($M) | $22,283 | $63,109 | $30,737 | $29,992 | $27,582 |
| Net Income ($M) | $20,101 | $42,309 | $19,359 | $16,094 | $17,837 |
| EPS (diluted) | $5.14 | $11.42 | $5.70 | $5.06 | $6.00 |
| Free Cash Flow ($M) | $26,104 | $45,814 | $31,198 | $35,086 | $23,916 |
| Annual DPS | $0.893 | $1.038 | $1.294 | $1.390 | $1.446 |
| Total Debt ($M) | $89,086 | $83,795 | $81,541 | $11,630 | $9,128 |
| Rev YoY Growth | — | +45.8% | -17.0% | -10.2% | -6.1% |
| EBITDA Margin | 18.8% | 21.4% | 19.6% | 20.0% | 19.8% |
| Operating Margin | 8.5% | 16.6% | 9.7% | 10.5% | 10.3% |
| Net Margin | 7.7% | 11.1% | 6.1% | 5.7% | 6.7% |
📈 DDM Scenarios
$64
🔴 Bear
$83
📊 Base
$112
🚀 Bull
$89.43
Current Price
$83
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 2.0% | 1.5% | 2.0% | 6.50% | $64 | ▼28.0% |
| 📊 Base | 4.5% | 3.0% | 2.5% | 6.50% | $83 | ▼7.6% |
| 🚀 Bull | 7.5% | 4.8% | 3.0% | 6.50% | $112 | ▲24.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.0% | Stage 2: 1.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.950 | $2.770 | $2.77 |
| Year 2 | Stage 1 | $3.009 | $2.653 | $5.42 |
| Year 3 | Stage 1 | $3.069 | $2.541 | $7.96 |
| Year 4 | Stage 1 | $3.130 | $2.433 | $10.40 |
| Year 5 | Stage 1 | $3.193 | $2.331 | $12.73 |
| Year 6 | Stage 2 | $3.241 | $2.221 | $14.95 |
| Year 7 | Stage 2 | $3.290 | $2.117 | $17.07 |
| Year 8 | Stage 2 | $3.339 | $2.017 | $19.08 |
| Year 9 | Stage 2 | $3.389 | $1.923 | $21.01 |
| Year 10 | Stage 2 | $3.440 | $1.832 | $22.84 |
| Terminal | — | TV=$77.97 | PV(TV)=$41.54 (65% of IV) |
Base Scenario
Stage 1: 4.5% | Stage 2: 3.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $3.022 | $2.838 | $2.84 |
| Year 2 | Stage 1 | $3.158 | $2.784 | $5.62 |
| Year 3 | Stage 1 | $3.300 | $2.732 | $8.35 |
| Year 4 | Stage 1 | $3.449 | $2.681 | $11.04 |
| Year 5 | Stage 1 | $3.604 | $2.630 | $13.67 |
| Year 6 | Stage 2 | $3.712 | $2.544 | $16.21 |
| Year 7 | Stage 2 | $3.823 | $2.460 | $18.67 |
| Year 8 | Stage 2 | $3.938 | $2.380 | $21.05 |
| Year 9 | Stage 2 | $4.056 | $2.301 | $23.35 |
| Year 10 | Stage 2 | $4.178 | $2.226 | $25.58 |
| Terminal | — | TV=$107.06 | PV(TV)=$57.03 (69% of IV) |
Bull Scenario
Stage 1: 7.5% | Stage 2: 4.8% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $3.109 | $2.919 | $2.92 |
| Year 2 | Stage 1 | $3.342 | $2.947 | $5.87 |
| Year 3 | Stage 1 | $3.593 | $2.974 | $8.84 |
| Year 4 | Stage 1 | $3.862 | $3.002 | $11.84 |
| Year 5 | Stage 1 | $4.152 | $3.030 | $14.87 |
| Year 6 | Stage 2 | $4.351 | $2.982 | $17.85 |
| Year 7 | Stage 2 | $4.560 | $2.934 | $20.79 |
| Year 8 | Stage 2 | $4.779 | $2.888 | $23.68 |
| Year 9 | Stage 2 | $5.008 | $2.841 | $26.52 |
| Year 10 | Stage 2 | $5.249 | $2.796 | $29.31 |
| Terminal | — | TV=$154.46 | PV(TV)=$82.28 (74% of IV) |
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 4.5% | $119 | $138 | $166 | $213 | $307 |
| 5.0% | $102 | $115 | $133 | $160 | $205 |
| 5.5% | $89 | $98 | $110 | $128 | $153 |
| 6.0% | $79 | $86 | $95 | $106 | $123 |
| 6.5% | $71 | $76 | $83 | $91 | $102 |
| 7.0% | $64 | $68 | $73 | $80 | $88 |
| 7.5% | $59 | $62 | $66 | $71 | $77 |
| 8.0% | $54 | $57 | $60 | $64 | $68 |
| 8.5% | $50 | $52 | $55 | $58 | $61 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | EV/EBITDA | P/FCF | FCF Yield | Div Yield | Total Yield |
|---|---|---|---|---|---|
| SHEL (Current) | 5.2x | 11.1x | 9.0% | 3.2% | 9.8% |
| XOM (ExxonMobil) | 6.8x | 14.2x | 7.0% | 3.5% | 8.5% |
| CVX (Chevron) | 6.2x | 13.5x | 7.4% | 4.3% | 9.0% |
| BP (BP plc) | 4.8x | 9.2x | 10.9% | 5.8% | 13.5% |
| TTE (TotalEnergies) | 5.0x | 10.5x | 9.5% | 4.0% | 10.5% |
| Big Oil Average | 5.6x | 11.7x | 8.8% | 4.2% | 10.3% |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $2.892 |
| Current Yield | 3.23% |
| Consecutive Growth Years | 4 |
| 1-yr DPS CAGR | +4.0% |
| 3-yr DPS CAGR | +7.6% |
| 5-yr DPS CAGR | +11.9% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 48.0% |
| FCF Payout Ratio | 36.0% |
| Sustainability Verdict | Safe |
Shell's dividend is highly safe: $2.89/yr DPS vs. $8.04 FCF/share = 36% FCF payout, even in the lower FY2025 FCF year. Dividend has grown for 4 consecutive years at 7.5% CAGR (3yr). Net cash balance of $21.1B provides extraordinary cushion. The 96% EPS payout ratio is misleading — GAAP EPS is depressed by D&A and non-cash items; FCF is the correct coverage metric for integrated majors.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $5.14 | — | — | — | Actual |
| 2022 | $11.42 | — | — | — | Actual |
| 2023 | $5.70 | — | — | — | Actual |
| 2024 | $5.06 | — | — | — | Actual |
| 2025 | $6.00 | — | — | — | Actual |
| 2026 | $2.48 | $3.17 | $4.01 | 23 | Estimate |
| 2027 | $2.89 | $3.64 | $4.54 | 22 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $261504.0B | — | — | — | Actual |
| 2022 | $381314.0B | — | — | — | Actual |
| 2023 | $316620.0B | — | — | — | Actual |
| 2024 | $284312.0B | — | — | — | Actual |
| 2025 | $266886.0B | — | — | — | Actual |
| 2026 | $213900.0B | $274100.0B | $360900.0B | 23 | Estimate |
| 2027 | $245400.0B | $290860.0B | $364700.0B | 22 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $83.33 | Range $70–$106
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Ryan Todd | Piper Sandler | Buy | $106 | +18.5% |
| Sam Margolin | Wells Fargo | Hold | $77 | -13.9% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $1.59 vs $1.48 | +$0.11 ✅ | $66600.0B vs $64500.0B | +$2100.0B ✅ | Q1 buyback $3.5B |
| Q3 2025 | $1.48 vs $1.42 | +$0.06 ✅ | $64800.0B vs $63000.0B | +$1800.0B ✅ | $3.5B buyback maintained |
| Q2 2025 | $1.52 vs $1.40 | +$0.12 ✅ | $67300.0B vs $65100.0B | +$2200.0B ✅ | Dividend raised 4% |
| Q1 2025 | $1.41 vs $1.32 | +$0.09 ✅ | $68200.0B vs $66000.0B | +$2200.0B ✅ | Stable production guidance |
(e) Confidence Band Commentary
SHEL has a wide analyst PT range ($70–$106) reflecting genuine uncertainty in oil price outlook. The 23 covering analysts show a clear Bull/Bear split: energy bulls see $100+ on LNG expansion; bears price in energy transition risk and lower oil prices. SHEL consistently beats quarterly EPS estimates — management has set conservative guidance since the Sawan cost reset. The forward EPS estimates ($3.17/$3.64) appear understated vs trailing $6.00 — analysts may be using a lower oil price deck (~$70/bbl) for forward projections.
💡 Investment Thesis
- Best-in-class FCF machine: SHEL generates $24–35B in annual FCF, providing ~3× coverage of the dividend. The payout ratio (% of FCF) is ~36%, leaving massive room for buybacks and balance sheet reinvestment. Total shareholder yield ~9.8%.
- Disciplined capital allocation under Sawan: Since 2023, Shell has exited low-return renewables, cut costs by $3B+, and refocused on highest-return barrels (deepwater, LNG). The streamlined portfolio improves ROCE and reduces volatility.
- LNG growth is a decade-long tailwind: Shell is the world's largest LNG trader. Global LNG demand is expected to grow 50%+ through 2040 as Asia transitions from coal. Shell's integrated LNG position (producer + trader) is a competitive moat.
- Shareholder returns engine: Dividend growing 4–8%/yr + $3.5B/qtr in buybacks = ~$15–20B annual returns beyond capex. Net cash balance of $21B adds flexibility.
- Discount to majors on FCF yield: SHEL trades at ~4.0% FCF yield (2025) or ~9% on normalized FY2024 FCF — compelling vs. Big Oil peers XOM, CVX, BP, TTE.
⚖️ DDM Verdict: Hold — Shell plc (SHEL)
Current price: $89.43 | Analyst Avg PT: $83.33
$64
🔴 Bear
$83
📊 Base
$112
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$76 | Begin position |
| Tier 2 — Add | ≤$73 | Add on weakness |
| Tier 3 — Full | ≤$68 | Full allocation |
| Sell Alert | ≥$95 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Hold at current price. SHEL's Base DDM intrinsic value of ~$79.08 is below the current price of $89.43, suggesting the stock is modestly ahead of intrinsic value. Analyst consensus PT of $83.33 also sits below current levels — the stock has rallied above where the Street expects it to go near-term.
Continue holding for the income and buyback yield (~9.8% total return). For new money, wait for a pullback toward $80–82 (near analyst PT consensus and Base DDM value). Becomes a Strong Buy below $75 (7.5% FCF yield, near Bear IV). Trim if oil spikes above $90/bbl and SHEL rallies toward $100+ (Bull IV).
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 159.4 |
| Average Cost Basis | $54.05 |
| Current Market Value | $14,255 |
| Unrealized P&L | $+5,640 (+65.5%) |
| Annual DPS | $2.892/yr |
| Annual Dividend Income | $461/yr |
| Current Yield (at price) | 3.23% |
| Yield on Cost | 5.35% |
| vs Target (~$200K) | $14,255 / $200,000 (7%) |
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice | DDM (3-stage) chosen for integrated major with consistent and growing dividend. Shell's strong FCF generation and explicit dividend policy make DDM the most direct approach. FCF coverage (36%) confirms dividend sustainability. |
| Ke Build | Ke = 4.30% (10yr Treasury) + 0.40 (beta) × 5.50% (ERP) = 6.50%. SHEL's NYSE ADS empirically trades with β≈0.40–0.50 in USD terms — lower than pure E&P names because integration (refining, chemicals, trading) provides natural hedges to oil price. Integrated majors globally trade at lower beta than exploration names. |
| DPS Base | Using $2.892 trailing annual DPS (sum of last 4 quarterly payments). Q1 2026 payment raised to $0.744/qtr → annualizing $2.976 — Base case captures this growing trajectory. |
| Sanity Check | Base DDM IV = $79.08 vs analyst consensus PT $83.33 (+5.4% gap — acceptable). Note: SHEL is trading at $89.43, materially ABOVE both the DDM IV and analyst PT. Market is pricing in oil price recovery and/or LNG premium not captured in the Base DDM scenario. The Bull IV of $105.50 aligns with Piper Sandler's $106 PT. |
| FCF vs DPS | FCF/share range: $8.04 (FY2025 low) to $11.03 (FY2024 high) vs DPS $2.89. FCF payout = 26–36%. The gap funds buybacks ($3.5B/qtr = ~$5.9/ADS/yr), making total cash returns ~$8.80/ADS/yr — well covered by FCF. |
| EPS Anomaly | Forward EPS estimates of $3.17 (FY2026) vs trailing $6.00 (FY2025) reflect analyst use of lower oil price deck ($70/bbl vs ~$78/bbl current). GAAP EPS also impacted by large D&A ($25B) and exploration charges. FCF is the better metric. |
| Net Debt | SHEL paid off virtually all LT debt in FY2025 (LT debt fell from $74.8B in FY2022 to near zero). Net cash = $21.1B. This significantly de-risks the dividend and enables higher buybacks. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.