Royal Dutch Shell Valuation As of December 3, 2018

Royal Dutch Shell Plc
Firm Valuation Equity Snapshot
December 3, 2018 Primary

Listing
Secondary
Listing
Location London New York City
RECOMMENDATION: BUY Exchange

Ticker
LSE
RDSA.L
NYSE
RDS-A
PRICE TARGET: $72.50 Market Cap
Enterprise Value
£
£
210,047 $
276,560 $
268,024
310,968
CURRENT PRICE: $60.40 Last Close Price £ 23.70 $ 60.40
TARGET FIRM
RDSA LN
Royal Dutch Shell (“Shell” or the “Company”) is a fully integrated British-Dutch energy and
petrochemical firm headquartered in The Hague, Netherlands and incorporated in the United Royal Dutch Shell
Kingdom. Royal Dutch Shell is a leading global oil, gas, & diversified energy firm, the six largest Plc
of whom are colloquially designated ‘oil majors.’ The Company is the largest firm in the FTSE
Currency USD
100 Index by market cap, maintaining a lead over the second largest firm by almost 70%. The LTM Rev $ 371,573
Company, led by CEO Ben van Beurden, employs approximately 86,000 people, who enable LTM Date 9/30/2018
Royal Dutch Shell to operate in over 70 countries globally. 2 Year Revenue $ 395,594
2 Year Date 12/31/2019
LTM Gross Profit $ 65,029
Royal Dutch Shell’s business operations are separated into three primary divisions: Upstream, LTM EBITDA $ 50,491
Integrated Gas & New Energies, and Downstream. A fourth division, Projects & Technologies, LTM EBIT $ 21,408
handles the delivery of projects exiting the pipeline and the management of research and LTM OCF $ 35,565
LFY Disp $ 32,824
development. The Company’s strengths include overseeing integrated value chains, prudent
LFY Acq $ (20,845)
financial and project management skills, and the development and utilization of technology in LFY FCF $ 11,979
operations. Rev Forecast Mo. 15
Rev Forecast Yrs. 1.25
Royal Dutch Shell (U.S.: NYSE RDS-A) was juxtaposed with industry peers, the most TARGET
Value Drivers
prominent of whom are Exxon Mobil Corp (U.S.: NYSE XOM), BP Plc (U.K.: LSE BP), and RDSA LN
Total S.A. (FRA: EPA FP). Our comprehensive valuation derives a price target of $72.50 for Exp. Rev. Growth 5.1%
Gross Profit Margin 17.5%
Royal Dutch Shell. EBITDA Margin 13.6%
EBIT Margin 5.8%
We recommend Royal Dutch Shell as a BUY. After the industry’s downturn due to the OCF Margin 9.6%
2014/2015 oil crisis, Royal Dutch Shell has outperformed industry peers on a financial and FCF Margin 3.2%
operational basis. Royal Dutch Shell is ahead of its European peers in research & development, investment, and utilization of
renewable energy sources. North American firms, who are not subject to the same degree of ESG scrutiny by policymakers
and investment groups, have fallen behind in renewable energy source exposure. These firms will have their day of reckoning.
Moreover, Royal Dutch Shell has vastly outperformed global peers on a strategic basis. Our price target of $72.50 is
reasonable given the Company’s 52-week high is $73.86, reached on May 21, 2018 and favorable future growth opportunities.
Royal Dutch Shell has wisely positioned itself to

withstand and capitalize on the inevitable energy
transition through substantial investments in cleaner,
lower production cost energy sources .
Moreover, Royal Dutch Shell’s acquisition of First
Utility allows the Company to compete with U.K.
residential utility providers such as Centrica. Royal
Dutch Shell’s prudent industry positioning has
transformed the Company from a legacy oil & gas
firm, to a fully integrated energy and petrochemical
firm that behaves more akin to an integrated utility
firm. Royal Dutch Shell has unparalleled executive
management and superior growth potential. Our
valuation recommends the Company as a BUY at a
price target of $72.50.
Analyst: Kevin Heymann, ASK Research 1 of 35

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TABLE OF CONTENTS
I. RECENT COMPANY NEWS ------------------------------------------------------------------------------------------ 4

II. OIL, GAS, & DIVERSIFIED ENERGY INDUSTRY ANALYSIS -------------------------------- 5
III. PORTER’S FIVE FORCES ANALYSIS ------------------------------------------------------------------------ 7
IV. COMPANY DESCRIPTION ----------------------------------------------------------------------------------------- 8
V. SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------------------------------ 9
VI. SEGMENT ANALYSIS------------------------------------------------------------------------------------------------ 11
VII. GOVERNANCE, BRAND, & RISK FACTORS -------------------------------------------------------- 13
VIII. RESEARCH & DEVELOPMENT, NEW PRODUCTS, & GROWTH ------------------- 15
IX. VALUATION SYNOPSIS -------------------------------------------------------------------------------------------- 18
X. THE INTELLIGENT INVESTOR: A VALUE APPROACH -------------------------------------- 19
XI. COMPARABLES ANALYSIS: MULTIPLES VALUATION -------------------------------------- 21
XII. ESIMATION OF COST OF CAPITAL --------------------------------------------------------------------- 25
XIII. DISCOUNTED CASH FLOW ANALYSIS & VALUATION --------------------------------- 27
XIV. VALUATION DISCUSSION: RECONCILLIATION OF ESTIMATES ---------------- 31
XV. HISTORICAL OPERATING FINANCIALS ------------------------------------------------------------- 32
XVI. COMPARABLE FIRMS FINANCIALS -------------------------------------------------------------------- 33

RECENT COMPANY NEWS
Royal Dutch Shell
▪ Royal Dutch Shell announced Q3 2018 earnings attributable to shareholders of
$5.6bn, up 50.6% YoY. Cash flow from operations jumped 59.5% in the same Royal Dutch Shell
period. Growth in earnings were primarily resultant of increased oil, gas, and LNG Maintains Massive
(liquefied natural gas) prices. Margins softened in downstream operations, deferred Buyback Program
tax charges increased in upstream operations, and currency fluctuations decreased
potential earnings. Production output of crude oil and natural-gas byproducts “Increasing the pace of
dropped 2% YoY. Natural-gas production fell 1% while overall production on an the buyback programme
oil-equivalent basis was down 2%. also indicates confidence
in delivery [of cash
▪ Royal Dutch Shell continued with its $25bn share buyback program, launching a flows.]”
second tranche with maximum aggregate consideration of $2.5bn in the period up
to and including January 28, 2019. Biraj Borkhataria
RBC Capital Markets
▪ Royal Dutch Shell finalized an investment in a Canadian LNG project in early
October 2018. The site is expected to transport VLCC (Very Large Crude
Carriers) tankers of supercooled natural gas to Asian importers by the mid-2020s.
▪ Royal Dutch Shell and Chevron were granted a 35-year-production sharing contract for the Saturno pre-salt block in
the Santos Basin in offshore Brazilian waters. Additionally, production began at the Lula Extreme South deep-water
development in the Santos Basin (25% pre-unitization interest).
▪ Royal Dutch Shell has divested of $30bn of assets since the 2014 oil price crash to reduce its debt gearing ratio to
20%. The Company’s debt gearing ratio declined to 23.1% from 23.6% in Q2 2018.
British Petroleum
▪ BP’s reported underlying profits in Q3 2018 doubling to $3.8bn from $1.9bn YoY, a five-year high and 30% higher
than analyst estimates.
▪ BP announced it will fund its $10.5bn acquisition of BHP Billiton’s onshore U.S. oil and gas assets with cash, enabled
by significant historical cash generation and subsequent cash buildup.
▪ BP plans to follow a similar divestment path as Royal Dutch Shell, with intentions to divest of roughly $6bn of assets
and using the proceeds to reduce its debt gearing ratio.
▪ BP is ahead of its 2021 growth targets of returning to production levels prior to the Deepwater Horizon oil disaster.
BP settled Deepwater Horizon disaster for $20bn with the U.S. government in 2015 and will continue to make annual
payments of approximately $1bn through 2030.
ExxonMobil
▪ ExxonMobil published Q3 2018 net income that soared 57% to $6.2bn YoY. Cash generation was reported at its
strongest level since the 2014/2015 oil crisis. Production, which reached a nadir in Q2 2018, increased significantly,
although still registered a drop YoY. Profit margins increased in part from North America trading arbitrage due to
production outpacing pipeline capacity.
▪ ExxonMobil continues activity in the Permian Basin region, where it has 38 rigs responsible for shale production.
Overall production fell 2%, in line with Royal Dutch Shell, however executives believe the increase petroleum
pumping in the Permian Basin will fuel a production reversal soon.
▪ ExxonMobil reported that domestic oil and gas production has now generated large profits, operations where it was
losing money a year earlier.
▪ ExxonMobil is a defendant in THE PEOPLE OF THE STATE OF NEW YORK v. EXXON MOBIL
CORPORATION claiming ExxonMobil fraudulently deceived shareholders about the risk of climate change.

OIL, GAS, & DIVERSIFIED ENERGY INDUSTRY ANALYSIS
Political
▪ The industry is subject to substantial, complex regulations, which vary considerably by country, state, and local law.
▪ Nearly all oil, gas, & diversified energy firms with a market cap
Select Laws & Regulations in the U.S.
greater than $25bn operate internationally. Thus, such firms are Year Legislation
subject to substantial geopolitical risk including government power The Mineral Leasing Act, as revised by The Federal
1920, 1987
changes, import/export taxes, and asset expropriation. Onshore Oil and Gas Leasing Reform Act
▪ Corruption, bribery, and scandals have cost government officials 1953 The Outer Continental Shelf Lands Act
their lives and firms in the industry billions of dollars in fines (Lava 1954 The Multiple Mineral Development Act
1969 The National Environental Policy Act
Jato in Brazil, Royal Dutch Shell & Eni in Nigeria, and Pemex 1976 The Federal Land Policy and Management Act
Corruption in Mexico). The Federal Oil and Gas Royalty Management Act,
▪ OPEC member countries produce approximately a third of the 1962, 1996 as amended by The Federal Oil and Gas Royalty
world’s oil and gas supply, and as such have historically had Simplification and Fairness Act
substantial bargaining power.
▪ Political officials in most democratic societies are subject to backlash if deemed to be too easy on the oil, gas, &
diversified energy industry.
Economic
▪ Firms operating in the oil, gas, & diversified energy industry are beholden to market fluctuations of commodity prices,
foreign currency exchange rates, and global supply and demand.
▪ The transportation of raw materials and finished goods necessitates substantial infrastructure investment whether by
firms themselves, governments, and/or public-private partnerships.
▪ Average taxation in the industry approaches 50% on a net income basis. Furthermore, over the past decade, average
return on invested capital has hovered around 5% annually. Therefore, it is imperative for firms to allocate capital in a
prudent manner.
▪ The industry may be adversely affected by the rise of alternative energy sources including LNG (liquefied natural gas),
shale, and renewable energies such as photovoltaic, wind, and biofuel energy sources.
▪ Large capital expenditures and vast scale are required to successfully obtain geographic diversification, particularly
regarding upstream operations.
Social
▪ The oil, gas, and diversified energy industry is also subject to increased pressure from investors as investor and activist
groups push for funds to divest equity stakes and limit lending to firms with ties to the industry.
▪ European fund managers face intense pressure to divest from companies that are not deemed green, ethical, or ESG
(environmental, social, governance) friendly.
▪ Climate change concerns regarding the effect of man-made greenhouse gas emissions has led to increased corporate
awareness and responsibility in the North American and European oil, gas, & diversified energy industry.
▪ Firms operating in the oil, gas, & diversified energy industry, are subject to intense scrutiny from environmental
activist groups such as the Green Alliance, Sierra Club, and Earth Liberation Front.
▪ A substantial portion of citizens in developed countries hold a neutral or unfavorable view of the industry.
Technology
▪ Firms in the industry have historically spent 2-5% of their capital budget on technology and innovation.
▪ The development of liquefied natural gas processes has greatly lowered the cost to store and transport refined
products. Additionally, LNG is the fastest growing segment of the gas market as it is plentiful, cost friendly, safer than
legacy energy sources, and ESG friendly.
▪ Newer technologies including LNG, shale, and renewable energies have and continue to present a threat to firms that
are not investing in alternative energy sources.
▪ Technological advances have accelerated the long overdue cost
minimization process, particularly in production. Unit production costs
among the six oil majors have decreased an average 33% since the 2014
oil crisis.
▪ Oil majors have developed new technologies internally and companies
including Royal Dutch Shell, ExxonMobil, and Total have been extremely
active in M&A in the past several years after the 2014 oil crisis.

OIL, GAS, & DIVERSIFIED ENERGY INDUSTRY ANALYSIS
Environmental
▪ Catastrophic failures such as the Exxon Valdez oil spill, BP Deepwater
Horizon oil spill, and the Prestige oil spill have undermined the
industry’s reputation.
▪ The rise of hydraulic fracturing (‘fracking’) to extract oil from subsurface
shale sources is attractive as production from shale is standardized,
repeatable, and scalable. However, fracking has been linked to earth
tremors, as seen most recently at the Cuadrilla fracking site near
Blackpool, U.K.
▪ Climate change has undoubtedly been exacerbated by man-made releases
of carbon, methane, and nitrous oxide. The extent to which greenhouse
gas emissions affects climate change is disputed.
▪ However, concerns over industry facilitation of climate change
definitively reduces the brand value of oil, gas, & diversified energy
firms.
Legal
▪ The nature of operating in countries with less established legal frameworks greatly exposes firms to fines, claims, and
lawsuits resultant from legal disputes.
▪ Business operations related to the procurement of contracts, partnerships, and/or foreign currency management can
lead to violations of anti-bribery, anti-corruption, and anti-money laundering laws. The Foreign Corrupt Practices Act
in the U.S. allows the U.S. government to sue firms with operations in the U.S., even if violation(s) occurred
internationally.
▪ Violations of antitrust and/or competition laws may lead to major impairments or fines, specifically from authorities
including the European Commission for Competition and the Federal Trade Commission’s Bureau of Competition.
▪ Over 100 countries currently have legislation regarding data protection. Violations of data protection laws, namely the
EU General Data Protection Regulation (GDPR), may lead to substantial criminal charges and civil penalties.
▪ Corporate investment in cybersecurity has risen in response to the 2017 NotPeyta cyberattack, which crippled firms
like Merck, Maersk, and Mondelez for weeks after the ransomware attack. Data breaches like Equifax in 2017 can lead
to large scale fines from consumer regulatory bodies.
International & Tariffs

▪ Global terrorism, targeted at the industry or not, has adversely affected
operations including, but not limited to, the discovery, extraction, refinery, and
transportation of energy sources. The unrest in the Niger Delta is a prime
example of the impairment of business operations due to terrorism from militant
groups attacking oil production facilities.
▪ Firms in the oil, gas, & diversified energy industry that conduct business
internationally are significantly exposed to geopolitical risk.
▪ Three out of four of the nations with the greatest number of proven crude
Oil from a leaking pipeline burns in a swamp
reserves, Saudi Arabia, Iran, and Venezuela, are near impossible to invest in as a area of the Niger Delta (Source: Reuters)
foreign firm. Further, China wants to prohibit foreign drilling in the entirety of
the disputed South China Sea region.
▪ Export/Import tariffs affect the industry as a byproduct of the U.S.-China Trade War mainly focus around tariffs on
specialty steel, which is used in E&P for drilling among other tasks. Chinese demand for LNG is the largest portion of
total demand for LNG. LNG contracts are typically long-term contracts and with new developments in the U.S.-
China Trade War, we could see a slowdown in LNG projects, further undermining future demand expectations.
▪ Recent developments increasing geopolitical risk include the U.S.-China Trade War, the murder of Jamal Khashoggi
by Saudi Arabia (a leading member of OPEC), and the Brazilian election of the oil, gas, and diversified energy industry
friendly, albeit politically questionable firebrand Jair Bolsonaro.
▪ Less recent, but still important developments affecting the oil, gas, & diversified energy industry include the Arab
Spring, Brexit, and the ongoing privatization of former Soviet Bloc oil and gas firms.
▪ Royal Dutch Shell, BP, and ExxonMobil all generate a significant portion of revenues from overseas. Refer to the
SEGMENT ANALYSIS section for a detailed breakdown of the percentages by measure and geography.

PORTER’S FIVE FORCES ANALYSIS
OIL, GAS, & DIVERSIFIED ENERGY INDUSTRY
THREAT OF NEW ENTRY

1. Industry is highly capital intensive
2. Numerous regulatory hurdles
3. Age-old industry relationships are necessary
4. High geopolitical risk
5. Requisite production, refining, and
transport infrastructure is expensive
VERDICT: LOW THREAT
SUPPLIER POWER BUYER POWER

1. Oilfields can be hard to procure 1. High global demand
2. Countries typically own E&P sites 2. Retail price is typically publicly
3. Permit process to drill or explore COMPETITIVE RIVALRY benchmarked
4. Transport and storage of products 3. Near compulsory for modern life
is costly 4. Buyers are cost sensitive
5. Companies can be their own Oil Majors 5. Commoditized so low switching
suppliers Oil, Gas, & Diversified Energy Firms costs
Renewable Energy Firms
Government Energy Firms
Mining Firms
VERDICT: MODERATE POWER VERDICT: VERY LOW POWER
THREAT OF SUBSTITUTION
1. New technologies in the long term
2. Timber, basic hydroelectric generation
3. Transportation: bicycle, sailboat, walking
4. One can live in a cabin in the woods
5. Very hard to substitute due to quality of life,
cost efficiency
VERDICT: LOW THREAT
INDUSTRY VERDICT: LOW THREAT
ROYAL DUTCH SHELL HAS A SIZEABLE MOAT, AS DOES THE OVERALL INDUSTRY

COMPANY DESCRIPTION
STRATEGIC OVERVIEW
Royal Dutch Shell conducts business in the oil, gas, & diversified energy industry. Broken down, this industry is divided into
three major sectors: upstream, midstream, and downstream activities. Oil and gas products are used to supply most of the
world’s energy consumption. The industry has grown rapidly since the first oil well was drilled 1846, at the Baku oilfields in
present day Azerbaijan. Europe and Asia presently meet ~30% of their energy needs using oil, while the Middle East uses oil
to meet more than 50% of their energy requirements.
Last year, the United States consumed 19.96 million barrels of petroleum products per day, 20.5% of total daily world
consumption of 98.19 million barrels of petroleum products per day. According to the Energy Information Administration,
transportation accounts for around 71% of petroleum consumption, followed by industrial accounting for 21-24% of
petroleum consumption. Commercial, residential, and electrical applications draw on less than 5% of daily petroleum product
consumption in the United States.
Royal Dutch Shell is composed of four fully integrated and incorporated commercial enterprises: Upstream, Integrated Gas &
New Engines, Downstream, and Projects & Technology.
▪ Upstream refers to the discovery of new reserves and the operation of
associated infrastructure. More specifically, it covers the exploration,
development, and production of oil and/or natural gas. Royal Dutch Shell
has significant interests in the North Sea, Nigeria, Northern Africa, and
the Gulf of Mexico. The Company has divested of several interests
recently in line with the Company’s stated strategy.
▪ Integrated Gas & New Energies encompasses liquefied natural gas
(LNG), low or zero carbon emission fuel resources, and renewable energy
sources. Midstream activities are defined as the gathering process, pipeline
management, and processing of unrefined products including previously
Offshore drilling in the Groningen Gas Field in Norway.
listed sources. In February 2016, Royal Dutch Shell closed on the The Dutch government is phasing out production by 2030.
acquisition of BG Group. Subsequently, Royal Dutch replaced
ExxonMobil as the leading LNG producer.
▪ Downstream operations involve the manufacturing, distribution, and
marketing of oil and related chemicals. Marketing counts usage by
commercial, residential, and industrial consumers in its scope. Royal Dutch
Shell operates in 70 countries worldwide, transporting and producing oil
and chemical products across the world daily.
▪ Projects & Technology is Royal Dutch Shell’s research and development
arm. The business line manages, acquires, and develops technology that
will be utilized in the Upstream and Downstream operations.
Royal Dutch Shell is a textbook example of a vertically integrated oil company, Shell acquired BG Group in 2016 at a 54% premium for
overseeing the entire value chain of the oil, gas, and diversified energy sector. nearly $70bn. The acquisition has been highly successful.
(Source: Company Website)
Given the nature of Royal Dutch Shell’s business model, there are significant
economies of scale and barriers to entry associated with the operation of business
in the oil and diversified energy sector. However, the company’s management attempts to see each of the four business lines
turn a profit so that a more profitable line will not be required to prop up a losing division. Royal Dutch Shell has fallen just
short of this lofty goal in recent years primarily due to the 2014/2015 oil crisis.
It is imperative for Royal Dutch Shell to solidify upstream operations.

Historically, upstream operations have acted as a profit center for downstream
operations. While downstream operations account for more than 80% of Royal
Dutch Shell’s revenue, downstream operations generate razor thin EBITDA
margins. Moreover, upstream operations generated more than 50% of profits in
2017 on a mere 20% of the Company’s revenue. Thus, the concept of kaizen
dictates Royal Dutch Shell maintain a strong footing in the upstream business,
while continuing to allocate capital efficiently and prudently to generate
shareholder returns.
Royal Dutch Shell’s revenue from 2009 to 2017, by region (in
billion U.S. Dollars). (Source: Statista)

SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
▪ Royal Dutch Shell recognizes revenue from sales of oil, natural gas, chemicals, and other products in compliance with
IFRS and IAS 18 (fair value of consideration received less cost of goods sold upon transfer to customer).
▪ Integrated Gas and Upstream: when the products are transferred into a vessel, pipe, or other delivery vehicle
▪ Downstream: when the product is delivered or received
▪ Joint arrangements are accounted for using the entitlement method, and production of oil and natural gas is typically
recorded using either the equity method or cost of completion method.
▪ BP recognizes revenue in a similar manner as Royal Dutch Shell, while ExxonMobil recognizes revenue in compliance
with U.S. GAAP.
Depreciation vs. Capital Expenditures

▪ Depreciation of property, plant, and equipment pertaining to production activities are depreciated on a unit of
production basis. PP&E held under lease are depreciated or amortized over the life of the contract.
▪ Royal Dutch Shell and Exxon Mobil both reported higher net depreciation for FY 2017 than capital expenditures,
indicating the respective organizations have been successful in paring back excessive capital expenditure.
▪ BP reported higher capital expenditure compared to net depreciation, which can be attributed to the firm’s continuing
expansion and rebuilding process following the 2010 Deepwater Horizon disaster.
Depreciation vs. Capital Expenditures
As of FY 2017, in USD millions
Capital
Depreciation Capital Productive Asset
Revenue Depreciation Expenditures
to Revenue Expenditures Investment Ratio
to Revenue
Royal Dutch Shell 305,179 26,223 8.59% (20,845) 6.83% 25.8%
BP 240,208 15,584 6.49% (17,840) 7.43% -12.6%
ExxonMobil 244,363 19,893 8.14% 15,730 6.44% 26.5%
Source: 2017 Company Annual Report
Operating and Capital Leases

▪ Royal Dutch Shell accounts for operating leases with the cost recognized as income on a straight-line basis.
▪ The Company also accounts for capital (finance) leases on PP&E and some capitalized E&P costs most typically at
fair value, with interest expense and principal repayment recorded as an expense and liability.
▪ BP and ExxonMobil account for leases in the same manner as Royal Dutch Shell, except for minor differences in
lease accounting between IFRS and U.S. GAAP.
▪ As shown below, Royal Dutch Shell holds many more operating and capital leases on a proportional revenue basis
than BP or ExxonMobil. BP does carry a substantial number of operating leases compared to asset heavy
ExxonMobil.
Operating & Capital Lease Analysis
Operating Operating Capital
Capital
Revenue Lease Lease Leases to
Leases
Obligations Obligations to Revenue
Royal Dutch Shell 305,179 23,169 15,524 7.59% 5.09%
BP 240,208 13,782 656 5.74% 0.27%
ExxonMobil 244,363 4,290 1,327 1.76% 0.54%
Goodwill and Balance Sheet Intangibles

▪ Royal Dutch Shell’s Intangible Assets at the end of FY 2017 were recorded at $30.7bn. These Intangible Assets after
depreciation, depletion, amortization, and impairments, have a carrying amount of $24.2bn at the end of FY 2017.
▪ More than 45% of Royal Dutch Shell’s Intangible Assets consist of Goodwill, which (at cost) jumped from $2.6bn at
the beginning of FY 2016 to $14.2bn at the end of FY 2017. The substantial increase is the result of a) the acquisition
of BG Group, and b) increased Company M&A activity.
▪ An additional 33% of the Company’s Intangible Assets are composed of LNG off-take and sales contracts.
▪ Comparatively, BP carries $11.6bn of Goodwill and $18.4bn of Intangible Assets on its FY 2017 Balance Sheet.
▪ Rival ExxonMobil carries just $9.8bn of Other Assets, which on a consolidated basis include Intangible Assets.
However, as documented in the Notes to Financial Statements, ExxonMobil does not have any Intangible Assets.
Furthermore, ExxonMobil does not carry any Goodwill on its FY 2017 Balance Sheet.

SIGNIFICANT ACCOUNTING POLICIES
Investments in Other Firms
▪ Royal Dutch Shell, BP, and ExxonMobil invest heavily in other firms as a means of increasing top line growth,
hedging geographical diversification risk, and obtaining exposure to a multitude of supply chain channels, should one
channel be offline at any given point.
▪ Investments in Other Firms are recorded using the cost method if the ownership stake is less than 20% and the equity
method if the ownership stake is 20-50%. Unrealized and realized gains or losses are recorded accordingly under U.S.
GAAP. IFRS 9 for equity investments and IAS 39 requirements are similar in accounting methodology.
▪ Moreover, investments in other firms including joint ventures, partnerships, and cooperating agreements, are often
the sole way to obtain exposure to E&P assets held by government owned and/or government sponsored entities.
Investments in Other Firms
Investments in Investments in
Investments
Revenue Total Assets Affiliates to Affiliates to
in Affiliates
Revenue Total Assets
Royal Dutch Shell 305,179 348,691 29,254 9.59% 8.39%
BP 240,208 276,515 24,985 10.40% 9.04%
ExxonMobil 244,363 262,505 33,466 13.70% 12.75%
Unfunded Pension Liabilities

▪ Royal Dutch Shell has held substantial unfunded pension liabilities on its balance sheet for at least the last ten years.
At December 31, 2017 the fund’s balance sheet tallied $104.3bn of plan liabilities to $93.2bn of plan assets.
▪ The Company, along with BP, BT, and BAE Systems, each had unfunded pension deficits of more than $8bn in FY
2017. The Pension Protection Fund (PPF) is a backstop fund in the U.K. that was established to protect members
(private pension schemes, all members pay an annual levy) from the bankruptcy of a firm’s defined benefit pension
fund. The bankruptcy of U.K firms Carillon and Patisserie Valerie in 2018 has drawn down on the PPF.
▪ Royal Dutch Shell accounts for its defined benefit and defined contribution pension liabilities in compliance with
IFRS, as does BP. ExxonMobil accounts for pension liabilities under U.S. GAAP.
Pension Analysis
Projected Over (Under) Actual Return Accumulated PBO to
Fair Value of Employer Pension
Benefit Funded (Loss) on Benefits Paid Benefit Market
Plan Assets Contribution Funding Ratio
Obligation Pension Plan Assets Obligation Capitalization
Royal Dutch Shell 93,243 104,285 (11,042) 6,961 1,804 (4,579) - 89.41 37.35
BP 46,513 51,481 (4,968) 2,099 637 (2,708) - 90.35 36.77
ExxonMobil 34,243 47,273 (13,030) 3,273 1,059 (4,255) 41,114 72.44 13.33
Option Compensation
▪ The Company has two principal share-based employee compensation plans: PSP (Performance Share Plan) and LTIP
(Long-Term Incentive Plan), which award American Depository Shares (ADSs). Senior management participates in
the same PSP and LTIP program.
▪ Royal Dutch Shell’s CEO, Ben van Beurden’s base salary was
€1,490,000 for FY 2017. The Company’s CFO, Jessica Uhl’s
base salary was €980,000 for FY 2017. An additional 88% of
the CEO’s maximum pay is variable (target of 79%) and 84%
of the CFO’s pay is variable (target of 72%). Approximately
93% of shareholder’s approved the director’s remuneration
policy and report.
▪ Executive option compensation for FY 2017 at BP and
ExxonMobil is well higher at $13,400,000 for BP CEO Bob
Dudley, and $17,500,000 for ExxonMobil CEO Darren
Woods.
▪ The overarching business world trend of increased focus on
corporate governance has lowered or flattened executive
salary and option compensation markedly over the last four Executive pay among select European and American oil, gas, & diversified energy
years. firms. (Source: Wall Street Journal)

SEGMENT ANALYSIS
Revenue and Net Income by Measure
Royal Dutch Shell PLC (RDSA LN) - By Measure Royal Dutch Shell
FY 2017 FY 2016 FY 2015
Amounts shown in
12/31/2017 12/31/2016 12/31/2015 1. Generates the lion’s share of revenue from
USD Millions
downstream operations, albeit less as the
Revenue YoY Growth Revenue YoY Growth Revenue YoY Growth
Company continues to diversify.
Revenue 305,179 30.6% 233,591 -11.8% 264,960 -37.1% 2. Integrated gas is a smaller but growing
Downstream 264,731 31.2% 201,823 -14.6% 236,384 -37.1% segment.
Integrated Gas 32,674 29.2% 25,282 16.3% 21,741 0.0% 3. Upstream operations do not look attractive as
a percentage of revenue basis but are
Upstream 7,723 20.4% 6,412 -4.9% 6,739 -85.1%
necessary for future growth.
Corporate 51 -31.1% 74 -22.9% 96 -15.0% 4. Net income margin is recovering rapidly.
Net Income, Adj. 16,182 125.2% 7,185 -32.7% 10,676 -53.9%
Downstream 9,082 25.4% 7,243 -25.7% 9,748 55.6%
Integrated Gas 5,268 42.4% 3,700 -26.8% 5,057 -51.1%
Upstream 3,091 214.3% (2,704) 19.9% (2,255) -133.4%
Corporate (1,259) 19.4% (1,054) -43.8% (1,874) -801.0%
BP PLC (BP/ LN) - By Measure BP

FY 2017 FY 2016 FY 2015
Amounts shown in
12/31/2017 12/31/2016 12/31/2015 1. Generates the bulk of revenue from
USD Millions
downstream operations.
2. Continued investment in downstream
Revenue 240,208 31.3% 183,008 -17.9% 222,894 -37.0% operations shows in the segment growth.
Downstream 218,053 31.0% 166,392 -17.0% 200,501 -38.1% 3. BP has not invested internally or externally in
Integrated Gas - 0.0% - 0.0% - 0.0% an integrated gas segment basis.
4. Upstream revenue growth has softened over
Upstream 21,261 36.2% 15,607 -26.7% 21,286 -28.8%
the past three years.
Power & Renewables 894 -11.4% 1,009 -8.9% 1,107 -1.9% 5. Net income margins are volatile but generally
improving.
Net Income, Adj. 11,858 180.7% 4,225 -51.9% 8,791 100.0%
Downstream 6,967 23.7% 5,634 -25.3% 7,545 69.9%
Integrated Gas - 0.0% - 0.0% - 0.0%
Upstream 5,865 1182.1% (542) -145.4% 1,193 -992.2%
Corporate (974) -12.3% (867) -1735.8% 53 -150.0%
Exxon Mobil Corp (XOM US) - By Measure ExxonMobil

FY 2017 FY 2016 FY 2015
Amounts shown in
12/31/2017 12/31/2016 12/31/2015 1. Relies less on downstream operations to fuel
USD Millions
Revenue YoY Growth Revenue YoY Growth Revenue YoY Growth revenue growth.
2. Chemicals division contributes a notable
Revenue 237,162 18.2% 200,628 -15.3% 236,810 -35.1% portion of revenue.
Downstream 184,576 18.8% 155,386 -15.8% 184,615 -36.2% 3. ExxonMobil has also not invested in an
Chemical 28,694 13.0% 25,391 -9.7% 28,134 -26.3% integrated gas segment.
4. Upstream revenue growth has been flat in
Upstream 23,857 20.3% 19,830 -17.6% 24,053 -35.3%
recent years.
Corporate 35 66.7% 21 162.5% 8 -55.6% 5. Net income margins are also inconsistent but
overall showing improvement.
Net Income, Adj. 19,710 151.4% 7,840 -51.5% 16,150 -50.3%
Downstream 5,597 33.2% 4,201 -35.9% 6,557 115.3%
Chemical 4,518 -2.1% 4,615 4.5% 4,418 2.4%
Upstream 13,355 6713.8% 196 -97.2% 7,101 -74.2%
Corporate (3,760) -220.8% (1,172) 39.1% (1,926) -19.3%

SEGMENT ANALYSIS
Revenue by Geography
Royal Dutch Shell PLC (RDSA LN) - By Geography
FY 2017 FY 2016 FY 2015
Amounts shown in
USD Millions 12/31/2017 12/31/2016 12/31/2015
Revenue 305,179 30.6% 233,591 -11.8% 264,960 -37.1%
Asia, Oceania, Africa 114,683 38.0% 83,103 -13.3% 95,892 -36.0%
Europe 100,609 23.3% 81,573 -14.3% 95,223 -38.5%
United States 66,854 36.0% 49,147 -3.0% 50,666 -28.5%
Other Countries 23,033 16.5% 19,768 -14.7% 23,179 -49.3%
BP PLC (BP/ LN) - By Geography

FY 2017 FY 2016 FY 2015
Amounts shown in
USD Millions 12/31/2017 12/31/2016 12/31/2015
Revenue 240,208 31.3% 183,008 -17.9% 222,894 -37.0%
Rest of World 176,113 49.4% 117,876 -20.7% 148,732 -35.5%
Other Countries - 0.0% - 0.0% - 0.0%
United States 88,709 36.2% 65,132 -12.2% 74,162 -39.7%
United Kingdom - 0.0% - 0.0% - 0.0%
Exxon Mobil Corp (XOM US) - By Geography

FY 2017 FY 2016 FY 2015
Amounts shown in
12/31/2017 12/31/2016 12/31/2015
USD Millions
Revenue 237,162 18.2% 200,628 -15.3% 236,810 -35.1%
Asia, Oceania, Africa 11,589 16.8% 9,919 -8.1% 10,790 -30.0%
Europe 44,828 18.2% 37,935 -22.3% 48,802 -32.5%
United States 82,079 17.0% 70,126 0.9% 69,506 -41.8%
United Kingdom 16,611 7.5% 15,452 -34.7% 23,651 -24.5%
Other Countries 82,055 22.1% 67,196 -20.1% 84,061 -33.5%
Royal Dutch Shell BP ExxonMobil

1. Revenue generation is split 1. BP does not itemize revenue by specific 1. Domestic (U.S.) revenue constitutes
approximately one third between the countries as do Royal Dutch Shell and approximately a third of global revenue.
Asia, Oceania, & Africa triumvirate and ExxonMobil. 2. ExxonMobil does not have a large
Europe. 2. Domestic (U.K.) revenue has historically presence in high growth (Asia, Oceania,
2. United States accounts for approximately bounced between 20-25%. Africa) markets.
just 20% of global revenue. 3. The U.S. still accounts for a third of 3. ExxonMobil does not have as sizeable of
3. Other Countries including Canada, revenue, considering Deepwater a presence in the U.K. as Royal Dutch
Mexico, and South America, account for Horizon. Shell or BP.
7-8% of global revenue. 4. Rest of World category in FY 2017 now 4. All other countries represent
includes Other Countries (40-45% avg.) approximately a third of global revenue.
and U.K. (20-25% avg.).

GOVERNANCE, BRAND, & RISK FACTORS
Governance
Royal Dutch Shell has undergone minimal turnover in the CEO role. Mr. Jorma Ollia headed the Company from 2005 to
2014. Following Ollia’s departure from the Royal Dutch Shell, Mr. Ben van Beurden took over the helm in January 2014 and
continues his tenure at present. Ms. Jessica Uhl is the Company’s CFO & Executive Director as of March 2017. In December
2018 the Company announced it will set carbon emissions targets and link the targets to executive pay from 2019 onwards.
Corporate Governance
Aggregate of ISS Governance Quality Score
Shareholder
Overall Audit Board Compensation
Rights
Royal Dutch Shell 9 10 1 1 9
BP 1 1 1 10 1
ExxonMobil 8 1 7 1 10
Source: Yahoo! Finance, Institutional Shareholder Services (ISS)
Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicative decile rank relative to index
or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. (Yahoo! Finance)
Royal Dutch Shell scores quite low on audit and compensation governance quality. Quality of executive compensation is
notably less concerning than audit quality, given the recent number of high-profile audit failures in Europe, Asia, and Africa.
EY serves as Royal Dutch Shell’s auditor as of FY 2016. BP by comparison scores highly on the ISS Governance Quality
Scorecard. The 10 for BP shareholder rights is due to BP charging ADS holders a dividend fee as of January 1, 2015.
Brand
Royal Dutch Shell once again solidified its status as the world’s most valuable Oil & Gas brand at an estimated value of
$36.8bn. The Company has placed at or near the top in many notable business rankings including, but not limited to:
▪ #1: UK Most Valuable Brand in 2017 (Brand Finance)
▪ #3: Britain’s Most Admired Companies (Management Today)
▪ #5: Fortune Global 500 in 2018; #7 Fortune Global 500 in 2017
▪ Top 50 on Glassdoor’s Top CEOs 2018 Employees’ Choice
▪ Top 100 on Forbes’ 2018 Best Employers for Women
According to OpenSecrets.org, Royal Dutch Shell has spent $7.26m on lobbying policymakers in the U.S. in 2018. The
Company’s spend falls behind ExxonMobil’s spend of $8.06m YTD but well ahead BP’s lobbying expenses of $3.03m.
Aggregate oil, gas, & diversified energy lobbying spend has dropped approximately $8m per annum since 2009 from $175.4m
to $99.3m.
Environmental Impact Analysis
As of FY 2017
CO2 Equivalent
Total CO2 N'Ox Total Energy Total Water
Methane S'O2 Emissions VOC Emissions Gas Flaring
Emissions Emissions Consumption Withdrawal
Emissions
Royal Dutch Shell 70000 3567 107 81 95 2500 288700 201000

BP 45800 3900 122 35 - 1987 210833 276000
ExxonMobil - 7250 1300 100 140 3800 416667 450000
Emissions and flaring shown in thousands of metric tons. Energy consumption shown in thousands of megawatt hours. Water withdrawal shown in thousands of cubic meters
Royal Dutch Shell owns valuable solar and wind assets in the U.S. and the Netherlands. A common misconception among the
general public is the failure to realize oil majors are the largest investors in renewable technology, with Royal Dutch Shell
leading the charge. At the Company’s 2017 strategy day Royal Dutch Shell reaffirmed an overarching mission to double its
renewable energy spending goal.
Further, Royal Dutch Shell has ventured into battery storage and EV charging. The NewMotion purchase exposes Royal
Dutch Shell to the battery storage industry, and the Company’s partnership with IONITY paves the way for expansion of its
European EV charging infrastructure in the upcoming year.

GOVERNANCE, BRAND, & RISK FACTORS
Industry Risk Factors
Royal Dutch Shell is exposed to a plethora of risk factors, many of
which are amplified due to the Company’s massive scale of
operations. The most prudent of these risk factors are:
▪ Fluctuations in commodity prices.
▪ Mismanagement of reserves.
▪ Macro-economic and geo-political developments.
▪ Maintaining asset integrity.
▪ Uncertainties associated with operational costs.
▪ Reinvestment risk of billions in free cash flow.
▪ Increased pressure from governments and citizens
regarding the industry’s facilitation of greenhouse gas
emissions.
Idiosyncratic Risk Factors

All oil majors face similar risks on the industry level. Risk factors unique to
Royal Dutch Shell include:
▪ International operations in more than 70 countries and regions
including such as Nigeria, North Africa, and the Middle East.
▪ Maintaining its spot as a leader in the new energy transition.
▪ The brand and environmental effect of earth tremors in the
Netherlands around the Groningen asset.
▪ The acquisition and integration of new upstream assets in line with
stated operational goals.
Financial risk factors uniquely affecting Royal Dutch Shell include, but are
not limited to:
▪ Substantial pension liabilities, which as of FY 2017 is underfunded
by nearly $12bn.
▪ Reinsurance risk stemming from self-insurance of the inability to
hedge some risk exposure.
▪ The $70bn acquisition of BG Group in early 2016 exposes Royal
Dutch Shell to geopolitical developments primarily in Brazil and
Australia, as well as potential future impairment write-offs.
▪ The Company must mitigate enhanced risks associated with end-to-
end production of liquefied natural gas resulting from the
acquisition of BG Group.
▪ Divestment of underperforming assets at the proper time and
disposing of assets at a fair price.
Additional idiosyncratic risk factors faced by Royal Dutch Shell can be

found in the SIGNIFICANT ACCOUNT POLICIES section.
Significant financial changes within Royal Dutch Shell after the acquisition of BG Group
(Source: 2017 Company Annual Report)

RESEARCH & DEVELOPMENT, NEW PRODUCTS, & GROWTH
Research & Development
A global leader in the oil, gas, & diversified energy industry, Royal Dutch Shell is commonly at or near the top of the industry
in annual R&D spend. Since 2010, however, the Company has continuously emphasized the goal to pare back past
irresponsible R&D expenditures. The peak -- and subsequent fall -- of the 2014/2015 oil crisis is quite evident in Royal Dutch
Shell and BP’s rollercoaster R&D spend.
Compared to FY 2010, Royal Dutch Shell spent less in FY 2017 on R&D capital expenditures. Reasons for this drop include
increased merger activity (outsourcing R&D risks), progress made towards the stated reduction of the Company’s debt gearing
ratio, and an enhanced focus on downstream operations, which is the source of nearly all revenue growth.
Research & Development Capital Expenditures
2017 2016 2015 2014 2013 2012 2011 2010
Royal Dutch Shell 922 1,014 1,093 1,222 1,318 1,307 1,123 1,019
BP 391 400 418 663 707 674 636 780
ExxonMobil 1,053 1,058 1,008 971 1,044 1,042 1,044 1,012
Source: Respective Company Financial Statements
ExxonMobil’s R&D expenditures surprisingly were flat through the crisis, a result of ExxonMobil’s sizeable investments in
ultra-low-cost shale gas production in the U.S. Moreover, after the 2014/2015 oil crisis, European oil majors including Royal
Dutch Shell and BP shifted management strategy to focus more on clean and renewable fuel sources. ExxonMobil and its U.S.
rival Chevron lag well behind their European competitors in clean and renewable fuel source investments. American oil majors
were not nearly as humbled by the 2014/2015 oil crisis as their European counterparts were.
The Company also continues to be an innovation leader in

deep water drilling along with U.K. competitor BP. In
October 2018, Shell Offshore, a subsidiary of Royal Dutch
Shell, celebrated the 40th anniversary of pioneering the
transition to modern deep water drilling by being the first to
drill past 1,000 feet. No other firm had ever come close to
drilling at that depth but Shell Offshore drilled the Cognac
oil and gas field. Four years later, the site was producing
72,000 barrels of oil equivalent (boe) daily. Deep water
drilling of proven reserves is cost efficient and profitable
compared to other methods of E&P. Additionally, only a
few firms have the level same human capital, technological
capacity, and experience in deep water drilling that Royal Royal Dutch Shell’s Deep Water Operations. The Company Has 40 Years of Experience in
Dutch Shell has. Finally, the Company does not have the Deep Water Drilling. (Source: 2017 Company Investor Presentation)
black mark on its deep water operations that BP carries
permanently.
New Products
Royal Dutch Shell has six major E&P projects given the greenlight.
Among these are the Appomattox deep-water project, the
Company’s largest floating platform in the U.S. Gulf of Mexico,
the Kaikias deep-water oil and gas project, also in the U.S. Gulf of
Mexico, and the Penguins oil and gas field in the U.K. North Sea.
Additional projects entering the stream include:
▪ Pennsylvania Petrochemicals Complex: a new massive
plant that will process ethane gas from harvested shale gas.
▪ Prelude FLNG: a cutting-edge floating liquified natural gas
facility, lowering cost and difficulty of extraction.
▪ Vito: Royal Dutch Shell’s 11th deep-water project in the Overview of Royal Dutch Shell’s Prelude FLNG. The facility began operation when
hydrocarbons were loaded onboard in June 2018. (Source: Shell Corporate)
U.S. Gulf of Mexico.

New Products (cont.)
The Company’s relatively new projects already online include:
▪ Pearl GTL (gas-to-liquids) plant in Qatar, which converts natural gas into clean fuels and lubricants.
▪ Parque das Conchas, an ultra-deep water field in offshore Brazil, utilizing innovative technology to reach and extract
materials.
▪ Bonga North West off the Nigerian coast, which produces oil from fields more than 1,000m under the surface.
Royal Dutch Shell undoubtedly understands best among oil majors the role new energies will play in the near term and coming
decades. The Company founded the New Energies segment in 2016 with the intent to increase its focus on the development
and procurement of new fuels and power sources. In April 2018 the Company published a report on strategy for the energy
transition, which affirmed goals to increase Royal Dutch Shell’s presence in the electrification sector in the medium term and
halve the net carbon footprint of energy the Company sells by 2050.
A collection of fascinating New Energies projects and joint ventures include:

▪ A joint venture with the Brazilian government where the Company operates a
large facility that converts sugar cane waste into fuel.
▪ In Bangalore, Royal Dutch Shell recently opened a cutting-edge research hub
where up to 1,500 experts are developing IH2 technology that transmutes
biomass and waste into vehicular fuel.
▪ A consortium of six operating partners, including the Company and the
German government, are gearing up to open 400 hydrogen-fueled electric
vehicle fuel stations, 230 of which are Royal Dutch Shell owned.
▪ Partnerships and acquisitions of firms like IONITY and NewMotion hedge
exposure to the inevitable energy transition and support a cleaner future.
Moreover, Royal Dutch Shell, unlike its U.S. based counterparts, has significant
investment activity in wind and solar power. Currently, the Company owns six land- Map of Ionity EV charging stations in Europe
(Source: Electrek)
based wind power projects in North America and an offshore wind power project in
Europe. Corporate investments in Silicon Ranch Corporation (January 2018), a US
based owner/operator of solar power assets, and SolarNow (August 2018), an African-focused solar system installation firm,
allow Royal Dutch Shell to uniquely meet customer demand, diversify energy transition risk, and meet global/Company set
greenhouse gas emission goals.
Growth
Royal Dutch Shell produces significant revenue from overseas. In FY
2017 the portion of revenue that was earned internationally stood at
67%. Growth in markets outside of Europe and the United States tends
to be higher but carries increased risk along with it. Industrial and
commercial uses will continue to greatly outpace residential and personal
uses. Refer to the SEGMENT ANALYSIS section to view the
geographical breakdown of revenues by firm.
Many insiders and outsiders of the oil, gas, & diversified energy industry
harbor an intense fear about the uncertainty of the increasing transition
to renewable energy. However, this fear is unwarranted and overblown
for a multitude of reasons. Oil majors and industry experts almost
unanimously agree that natural gas will be an integral part of the bridge
between legacy fossil fuels and renewable energies.
The development of liquefied natural gas, helped by small-size re-

gasification units and innovative technology, has and will continue to
reduce capital costs of production. Royal Dutch Shell and ExxonMobil
are the number one and two largest LNG developers in the world. BP
does not make the top seven.
Forecasted Growth in Global Industrial Energy Usage (Source: ExxonMobil
2018 Outlook for Energy: A View to 2040)
Growth (cont.)
Refinery capital expenditures will likely exceed $400bn by 2026 and therefore global oil refining capacity will increase,
according to the IEA. Strong Asian demand and the desire of Middle Eastern oil exporters to diversify are the primary
demand drivers. Refinery investment in Asian markets by Petrochina, Sinopec, Indian Oil, Bharat Petroleum, and Reliance
Industries, present an opportunity and threat in the coming years for Royal Dutch Shell. For the medium-long term however,
Royal Dutch Shell is positioned to capitalize on the blazing hot Indian and Chinese economies (both are registering annual
GDP growth between 6.5 and 8.0%) through Prelude FLNG (based off the coast of Australia), LNG Canada (VLCC tankers
carrying LNG to Asia), and the Gumusut-Kakap & Malikai deep-water project off Malaysia.
“[India] needs to be in the top five in terms of our oil products business, in terms of contribution, customers and financial
contribution. And a similar story I could tell for lubricants and natural gas.”
- Royal Dutch Shell CEO Ben van Beurden in a March 2018 with The Economic Times
Renewable energy (solar, wind, and battery) will continue to grow and
will be a vital part of the oil, gas, & diversified energy industry by 2050.
Renewable energy proponents readily claim ‘peak oil’ demand is right
around the corner, largely due to the rise of electric vehicles, oil reserves,
and efficient technologies. These concerns are premature and short
sighted. EV battery technology, which Royal Dutch Shell is invested in,
makes up 40% of an EVs expense. EV battery packs require lithium,
cobalt, and nickel, which have risen in cost by more than 200% since late
2014. Nearly all the global cobalt supply comes from the Democratic
Republic of Congo, where warring factions control the supply chain and
the use of child labor is widespread. Further, EV cumulative fuel
displacement in TTM 2018 represented just 0.3% of TTM global oil
demand.
Additionally, the exponential rise of the Internet of Things industry will

raise global demand for energy sources further. Proven oil reserves have
shown to be vastly underestimated, and LNG reserves exceed 250 years
of demand. In the unlikely event oil and gas demand reaches its peak
sooner than forecasted, Royal Dutch Shell is well positioned outside in
diversified energy to rapidly take advantage of the transition.
Technologies that promise to increase the efficiency of commercial,

industrial, and residential energy consumption present a moderate Forecasted Growth in Global Renewable Energy Usage (Source: ExxonMobil
2018 Outlook for Energy: A View to 2040)
threat. Gains in efficiency are projected to reduce total energy demand
by half from 50% to 25% growth by 2040, according to the IEA.
Efficiency gains and cleaner technology are a win-win for society and firms like Royal Dutch Shell.
However, Isaac Newton’s three Laws of Motion state that an object will
remain at rest unless compelled by external force; force must equal
momentum times acceleration; and every action has an equal opposite
reaction. Moreover, Albert Einstein proved E = mc2. Thus, we must not
forget that all energy comes from somewhere and enticing technologies
that enhance energy utilization efficiency are still bound by the laws of
physics. Energy demand will, with near certainty, exist ad infinitum, and
Royal Dutch Shell will be there to provide energy the global population
demands.
Society is not concerned about how you do what you do or why you do
it. Rather, society is compelled by the reason you do something. Royal
Dutch Shell is continuing to lead the industry in facing emissions Forecasted Growth in Global GDP (Source: ExxonMobil 2018 Outlook for
concerns head on rather than deflecting as firms in other industries have Energy: A View to 2040)
in the past. We all want to leave a cleaner environment for future
generations.
VALUATION SYNOPSIS
Valuation Methodology Comparison of Computed Valuation to Market Value
Valuation techniques used to compute price targets for Royal Dutch Shell
include: As of 11/30/2018, in USD
▪ Comparables Analysis Market Valuation
Current Market Value 60.40
▪ DCF Analysis
High (52 Week) 73.86
Low (52 Week) 58.55
Regression analysis was conducted for both the direct and indirect 50 Day Moving Average 62.47
portions of the comparables analysis. Our estimate of equity and debt 200 Day Moving Average 66.44
cost of capital is discussed in the ESTIMATED COST OF CAPITAL Direct Valuation
section. The derived WACC was then used as the discount in our DCF P/FCF Expected Value 54.85
model. P/E Expected Value 73.11
EV/EBITDA vs. Gross Profit Regression 80.38
Each of these techniques are detailed in the following pages. A summary Indirect Valuation
of valuation prices is located on the right along with various statistical EV/EBITDA Median Expected Value 58.32
metrics. Historical operating financials from 2011-2018 for Royal Dutch EV/EBITDA vs. Gross Profit Regression 73.76
Shell and its top two competitors, BP and ExxonMobil, can be found in DCF Valuation
the HISTORICAL OPERATING FINANCIALS section. Additionally, EBITDA Exit Multiple 73.58
we compared Royal Dutch Shell to BP and ExxonMobil to differentiate Gordon Growth Model 77.57
the shares of each based on the valuation framework of renowned value Valuation Statistics
investor Ben Graham. Average of Comparables & DCF Valuation 70.22
Median of Comparables & DCF Valuation 73.58
Earnings Drivers & Key Performance Indicators

Current as of 11/30/2018, Spot Prices in USD (Dollar/Barrel or Dollar/Million BTU) or Production Million Barrels Per Day
Brent Crude WTI Crude Imported Crude (U.S.) Refiner Average AC Henry Hub Oil Production Gas Production
2018 Current 59.07 50.72 67.70 69.19 4.64 11.48 3.46
2017 Average 54.15 50.79 48.98 50.68 2.99 9.35 3.78
2018 Average 73.12 66.79 62.88 65.87 3.01 10.90 4.37
2019 Estimate 71.92 64.85 61.30 63.88 2.98 12.06 4.86
Valuation Snapshot
We have set a price target of $72.50 for Royal Dutch Shell to reach in the next twelve months. This valuation represents a
20.0% increase to the current market price of $60.40 as of November 30, 2018. The Company has tremendous growth
potential backed by strong management and rapidly improving financial data. Revenue has climbed 21.8% YTD and is on pace
to come in at 29.0% YoY revenue growth for FY 2018.
Our Upper End of Forecast Range is $77.50, and our Lower End of
Forecast Range is $67.50. This price target range is the most probable
scenario after examining sensitivity analysis of our preferred DCF valuation.
The Blue Sky scenario of $90.00 represents what we believe to be a valid
12 month forecast price ceiling in an optimal market. The Grey Sky
scenario of $50.00 serves as our price floor in the event of unfavorable and
drastic market changes in the next 12 months.
Aggregate Analyst Price Target Recommendations for Royal Dutch Shell
Consensus among 27 analysts offering 12-month price targets for Royal Class A (Source: CNN Business)
Dutch Shell have a median price target of $77.50, a 28.3% increase to the
current market price. The highest projected estimate is $88.15, a 46.0%
increase compared to market. The lowest is $64.00, a 6.0% increase to
market.
Of the 27 analysts covering the Company, 17 convey BUY ratings, 9 deliver

HOLD ratings, and only a single analyst presents a SELL rating. The
increase in HOLD ratings, as depicted in the graph to the right, is
attributable to recent volatility in the commodity markets due primarily to
oversupply concerns for crude oil, and undersupply concerns for natural
Historical Analyst Investor Action Recommendation for Royal Dutch
gas. Shell Class A (Source: CNN Business)
THE INTELLIGENT INVESTOR: A VALUE APPROACH
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018)
Ben Graham Analysis
RDS-A BP XOM
Hurdle #1
Number of Hurdles Met 5 5 4 ▪ RDS-A and BP have near identical
Number of Hurdles Required 6 6 6 EPS. XOM has a TTM EPS Ratio
Value Verdict NO NO NO below the 5.99% threshold at 5.46%.
▪ Treasuries are rising in line with
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018) CPI/PCE and the global retreat
from central bank QE.
Hurdle #1: TTM Normalized Basic EPS to Price Ratio of at Least 2.0 * 10 YR UST
▪ Ben Graham would prefer to invest
RDS-A BP XOM in another part of the equity market.
TTM Normalized Basic EPS $ 5.12 $ 4.75 $ 4.34
Price (as of 11/30/2018) 60.40 40.35 79.50 Hurdle #2
▪ Earnings in the industry were
Earnings/Price Ratio 8.48% 11.76% 5.46% severely dented for a couple years by
10 YR UST (as of 11/30/18) 2.99% 2.99% 2.99% the 2014 oil crisis.
2.0 * 10 YR UST 5.99% 5.99% 5.99% ▪ XOM was able to maintain stable
YES YES NO earnings, primarily from shale (low
production cost).
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018) ▪ BP’s P/E has been distorted since
Hurdle #2: Current P/E Ratio No More Than 50% of the Stock's Highest Annual P/E Ratio Over the 2010 from the $20bn Deepwater
Past Five Years Horizon fine.
▪ BP and XOM trade above the
RDS-A BP XOM
median P/E ratio of the eight ultra-
TTM P/E Ratio (as of 11/30/18) 11.69 15.61 14.61 prime comps, while RDS-A trades
2017 P/E Ratio 57.06 1143.30 37.72 below 2.5x below the median P/E
2016 P/E Ratio 90.28 1031.31 37.45 ratio.
2015 P/E Ratio 72.53 35.48 19.93
2014 P/E Ratio 16.04 31.16 14.16 Hurdle #3
2013 P/E Ratio 13.78 13.92 13.73 ▪ Most stable firms across all
industries that pay a dividend will
YES YES YES pass this hurdle due to low treasury
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018) rates.
▪ RDS-A has a long history of
Hurdle #3: A Dividend Yield of at Least 50% * 10 YR UST maintaining dividend payments
through crises, even borrowing
RDS-A BP XOM money to pay dividends.
TTM Dividend $ 3.75 $ 2.44 $ 3.18 ▪ BP and XOM have lower a dividend
Price (as of 11/30/2018) 60.40 40.35 79.50 yield than RDS-A. One explanation
is both are beset by various ongoing
Dividend Yield 6.21% 6.05% 4.00% litigation.
50% * 10 YR UST 1.50% 1.50% 1.50% ▪ Ben Graham is likely neutral on the
YES YES YES firms even though they passed the
last two hurdles (high P/E volatility).
Hurdle #4: Stock Price Less Than 150% * Tangible Book Value Per Share Hurdle #4
▪ BP has more Intangible Assets to
RDS-A BP XOM Total Assets at 10.3% vs. RDS-A at
Total Assets $ 407,989 $ 282,942 $ 354,628 5.8%.
Less: Intangible Assets 23,684 29,126 - ▪ BP has a slightly higher but similar
9767 Total Debt to Total Asset ratio at
Total Tangible Assets $ 384,305 $ 253,816 $ 354,628 22.7% as RDS-A (19.2%).
▪ BP’s TBV/Share * 150% is much
Short Term Debt $ 13,923 $ 9,175 $ 19,413 higher than trading price due to
Plus: Long Term Debt 64,455 54,960 20,624 Deepwater Horizon and paring back
growth post 2010.
Total Debt $ 78,378 $ 64,135 $ 40,037
▪ XOM has quite a low Total Debt to
Total Asset ratio compared to RDS-
Tangible Book Value $ 305,927 $ 189,681 $ 314,591 A and BP at 11.3%.
Number of Basic Shares Outstanding 4,171 3,329 4,234 ▪ Ben Graham likes stocks that have
Tangible Book Value Per Share $ 73.35 $ 56.98 $ 74.30 plentiful tangible assets.
Price (as of 11/30/2018) $60.40 $40.35 $79.50

150% * Tangible Book Value Per Share $110.02 $85.47 $111.45
YES YES YES

THE INTELLIGENT INVESTOR: A VALUE APPROACH
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018) Ben Graham Analysis
Hurdle #5: Stock Price Less Than 150% of Net Liquidation Value Per Share Hurdle #5
▪ RDS-A has a large debt pile and has
RDS-A BP XOM substantial but has the highest net
Current Assets $ 107,246 $ 74,968 $ 47,134 liquidation value.
Less: Total Debt 78,378 64,135 40,037 ▪ BP and XOM have positive net
liquidation value but are not in the
Net Liquidation Value $ 28,868 $ 10,833 $ 7,097 same ballpark compared to recent
Number of Basic Shares Outstanding 4,171 3,329 4,234 market price.
Net Liquidation Value / Share $ 6.92 $ 3.25 $ 1.68 ▪ RDS-A continues to pare back debt
to reduce its debt gearing ratio while
Price (as of 11/30/2018) $60.40 $40.35 $79.50 holding plenty of current assets.
150% * Net Liquidation Value / Share $10.94 $5.14 $2.65 ▪ Ben Graham would not be a fan of
any of these three firms based on
NO NO NO this hurdle.
Hurdle #6
Hurdle #6: Total Debt Less Than Tangible Assets ▪ All three firms clear this hurdle by
carrying at least 3.0x Total Tangible
RDS-A BP XOM Assets to Total Debt.
Total Debt $ 78,378 $ 64,135 $ 40,037 ▪ Firms in the industry own many
Total Tangible Assets 384,305 253,816 354,628 physical, long life fixed assets
Total Debt Less Tangible Assets $ (305,927) $ (189,681) $ (314,591) including exploration assets, refining
assets, and transport assets.
YES YES YES
▪ XOM is unique in that it carries no
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018) Goodwill or Intangible Assets on its
balance sheet and owns outright
Hurdle #7: Compound Normalized Basic Annual Earnings Growth Exceeding 7% Per Year Over the nearly all its tangible assets.
Last Five Years or at Least the Last Ten Years. ▪ Ben Graham would find all three
RDS-A BP XOM very attractive buys.
TTM Normalized Basic EPS $ 5.12 $ 4.75 $ 4.34
2013 Normalized Basic EPS 6.06 4.07 7.37 Hurdle #7
Earnings CAGR Over Last 5 Years -3.32% 3.13% -10.03% ▪ EPS is volatile in the oil, gas, &
NO NO NO diversified energy industry.
▪ BP is the only of the three to have
positive 5/10 Yr. EPS CAGR.
2008 Normalized Basic EPS $ 7.71 $ 7.02 $ 8.70 ▪ BP settled Deepwater Horizon in
Earnings CAGR Over Last 10 Years -4.01% -3.85% -6.71% 2015, which is why 2013 EPS is so
NO NO NO high compared to TTM EPS.
▪ XOM has suffered the greatest over
Ben Graham Comparison of RDS-A, BP, & XOM (Current as of Q3 2018) the last ten years. In 2008
Hurdle #8: Stability in Earnings Growth: <= Two YoY Declines of >= 5% in Normalized Basic Normalized Basic EPS was $8.70 vs
TTM Normalized Basic EPS of
Earnings Per Share Over the Last 10 Years.
$4.34, a decline of 50.1%.
RDS-A BP XOM
TTM Normalized Basic EPS $5.12 29% $4.75 53% $4.34 21% Hurdle #8
2017 Normalized Basic EPS $3.97 89% $3.11 220% $3.59 49% ▪ RDS-A has registered significant,
2016 Normalized Basic EPS $2.09 -24% $0.97 -50% $2.41 -38% outsize EPS growth since its nadir in
2015 Normalized Basic EPS $2.77 -52% $1.93 -46% $3.91 -48% 2015.
2014 Normalized Basic EPS $5.81 -4% $3.57 -12% $7.53 2% ▪ 2008, 2011, and 2012 were arguably
the best years for the three based on
2013 Normalized Basic EPS $6.06 -34% $4.07 -20% $7.37 -8% EPS data.
2012 Normalized Basic EPS $9.23 -4% $5.11 -30% $8.05 -5% ▪ All three firms had 5/10 earnings
2011 Normalized Basic EPS $9.64 41% $7.29 8% $8.43 34% declines of greater than 5%,
2010 Normalized Basic EPS $6.84 49% $6.77 20% $6.28 56% indicative of the volatility/cyclicality
2009 Normalized Basic EPS $4.58 -41% $5.64 -20% $4.02 -54% of EPS in the industry.
▪ Ben Graham would likely be terrified
2008 Normalized Basic EPS $7.71 $7.02 $8.70
by the industry’s earnings volatility
Number of Earnings Decline >5% 5 / 10 6 / 10 5 / 10 as shown in the last two hurdles.
NO NO NO

COMPARABLES ANALYSIS: MULTIPLES VALUATION
Comparables Selection & Sorting Methodology
The first step in conducting a comparable analysis involved compiling firms in the oil, gas, & diversified energy industry that
are comparable to the Company on a financial and operational basis. We then sorted comparables compiled from the
Bloomberg Terminal based on financial and operational comparability and selected 30 of the most comparable firms. Next,
TTM value drivers and analyst revenue estimates were distilled into a single matrix once we parsed relevant financial
statements. The breadth of financial data for all 30 firms was analyzed and distilled into six categories of value drivers:
▪ Expected Revenue Growth
▪ Gross Profit Margin
▪ EBITDA Margin
▪ EBIT Margin
▪ OCF Margin
▪ FCF Margin
Next, the raw numerical financial data of the six value drivers was placed on a separate spreadsheet. The six value drivers for
each of the 30 comparable firms were broken into separate rows and sorted smallest to largest. Constraints on the upper and
lower bounds were placed on the six value drivers to discover firms most comparable to Royal Dutch Shell. The original list of
comparable firms totaled 30 and was trimmed to 12 prime comparables. The group of 12 was further analyzed for financial
comparability and eventually whittled to eight ultra-prime comparables. A visual of the sorting process and list of all 30
comparable firms can be found on the following page. We used these eight ultra-prime comparables to conduct our
comparable analyses. Select financial data for the eight-ultra prime comparables is displayed below. Full financial data for all 30
firms can be found on in the COMPARABLE FIRMS FINANCIAL DATA section.
TARGET FIRM I II III V IX X XI XIV XXVI
RDSA LN BP LN FP EPA XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL
China
Royal Dutch Shell Exxon Mobil PetroChina Co Imperial Oil Galp Energia
BP Plc Total SA Eni SpA Petroleum & Repsol SA
Plc Corp Ltd Ltd SGPS SA
Chemical Corp
Currency USD USD USD USD EUR USD USD EUR USD EUR
LTM Rev $ 371,573 $ 290,895 $ 179,236 $ 277,594 $ 73,311 $ 347,042 $ 401,414 $ 48,092 $ 26,131 € 16,666
LTM Date 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018
2 Year Revenue $ 395,594 $ 315,835 $ 217,311 $ 326,449 $ 82,886 $ 354,987 $ 407,185 $ 54,311 $ 28,014 € 19,382
2 Year Date 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019
LTM Gross Profit $ 65,029 $ 46,503 $ 62,285 $ 31,235 $ 21,773 $ 70,883 $ 95,419 $ 11,061 $ 4,035 € 3,169
LTM EBITDA $ 50,491 $ 33,302 $ 31,110 $ 40,032 $ 18,111 $ 60,583 $ 35,192 $ 6,054 $ 3,096 € 2,576
LTM EBIT $ 21,408 $ 15,680 $ 13,989 $ 18,572 $ 4,586 $ 11,993 $ 12,822 $ 2,997 $ 1,041 € 1,049
LTM OCF $ 35,565 $ 21,947 $ 22,678 $ 34,818 $ 12,640 $ 56,676 $ 34,945 $ 4,206 $ 3,220 € 1,538
LFY Disp $ 32,824 $ 18,931 $ 22,319 $ 30,066 $ 10,117 $ 52,810 $ 29,270 $ 4,576 $ 2,130 € 1,432
LFY Acq $ (20,845) $ (16,562) $ (13,767) $ (15,402) $ (8,490) $ (33,961) $ (10,511) $ (2,300) $ (766) € (791)
LFY FCF $ 11,979 $ 2,369 $ 8,552 $ 14,664 $ 1,627 $ 18,849 $ 18,759 $ 2,276 $ 1,365 € 641
Rev Forecast Mo. 15 15 15 15 15 15 15 15 15 15
Rev Forecast Yrs. 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25
TARGET I II III V IX X XI XIV XV
Value Drivers RDSA LN BP LN FP EPA XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL
Exp. Rev. Growth 5.1% 6.8% 16.7% 13.8% 10.3% 1.8% 1.1% 10.2% 5.7% 12.8%
Gross Profit Margin 17.5% 16.0% 34.7% 11.3% 29.7% 20.4% 23.8% 23.0% 15% 19%
EBITDA Margin 13.6% 9.1% 15.1% 14.4% 24.7% 17.5% 8.8% 12.6% 12% 15%
EBIT Margin 5.8% 4.5% 8.3% 6.7% 6.3% 3.5% 3.2% 6.2% 4% 6%
OCF Margin 9.6% 7.5% 12.7% 12.5% 17.2% 16.3% 8.7% 8.7% 12% 9%
FCF Margin 3.2% 0.8% 4.8% 5.3% 2.2% 5.4% 4.7% 4.7% 5% 4%
The top eight most comparable firms to Royal Dutch Shell based on the matrix sorting are BP, Total, ExxonMobil, Eni,
PetroChina, China Petroleum & Chemical, Repsol, Imperial Oil, and Galp Energia. This grouping, particularly the first four, is
no surprise to anyone familiar with the oil, gas, & diversified energy industry. Royal Dutch Shell, BP, Total, ExxonMobil, and
Eni are five of the six so called oil majors. ExxonMobil, BP, Total, PetroChina, and China Petroleum & Chemical are most
comparable to Royal Dutch Shell on a financial basis.
What is surprising is how divergent the sixth oil major, Chevron, performed financial in comparison to Royal Dutch Shell. The
takeaway is that Chevron beat Royal Dutch Shell on each of the six value drivers, which is impressive but a result of Chevron
expanding its reach in domestic (U.S.) operations and Royal Dutch Shell’s outsize scale limiting its ability to power consistent
high growth and robust margins. BP and ExxonMobil are the two firms most comparable to Royal Dutch Shell based on a
strategic comparison such as scale and operations, and incidentally the six value drivers.

Value Drivers RDSA LN BP LN FP EPA XOM US CVX US ENI IM ENGI FP COP US EQNR NO 857 HK 386 HK REP SM PETR4 BZ SU CN IMO CN ECOPETL CB 883 HK ROSN RU GAZP RU LKOH RU CVE CN SIBN RU YPFD AR HSE CN MPC US OMV AV GALP PL PSX US RIL IN PTT TB MOL HB MEDIAN MEAN DIFFERENCE (%)
Exp. Rev. Growth 0.0514 0.0680 0.1666 0.1385 0.1794 0.1032 0.0082 0.1325 0.1081 0.0183 0.0115 0.1022 0.0246 0.0800 0.0572 0.0302 0.1393 0.0349 0.0269 -0.0113 0.0340 0.0336 -0.0598 -0.0119 0.3625 0.2094 0.1246 0.0103 0.1403 0.0424 -0.0207 7.4% 8.0% 7.5%
Gross Profit Margin 0.1750 0.1599 0.3475 0.1125 0.1039 0.2970 0.4389 0.2580 0.4981 0.2043 0.2377 0.2300 0.3544 0.6206 0.1544 0.3992 0.5355 0.4865 0.5785 0.3790 0.4674 0.2250 0.1613 0.1254 0.0781 0.2923 0.1902 0.0938 0.3335 0.1537 0.2800 24.8% 28.7% 13.6%
EBITDA Margin 0.1359 0.0911 0.1507 0.1442 0.2117 0.2470 0.1385 0.3718 0.3452 0.1746 0.0877 0.1259 0.2860 0.3495 0.1185 0.4505 0.5706 0.2248 0.2656 0.1382 0.1515 0.2598 0.3163 0.2329 0.0810 0.2660 0.1545 0.0469 0.1592 0.1678 0.1557 16.3% 21.4% 24.1%
EBIT Margin 0.0576 0.0453 0.0834 0.0669 0.0893 0.0625 0.0177 0.1330 0.0644 0.0346 0.0319 0.0623 0.0588 0.1150 0.0398 0.1777 0.1576 0.0922 0.1369 0.0729 -0.0503 0.1567 0.0816 0.0857 0.0280 0.0987 0.0630 0.0368 0.0774 0.0622 0.0650 6.2% 7.1% 12.4%
OCF Margin 0.0957 0.0754 0.1265 0.1254 0.1806 0.1724 0.1378 0.3340 0.2320 0.1633 0.0871 0.0875 0.2731 0.2641 0.1232 0.3426 0.4962 0.1298 0.2214 0.1141 0.1292 0.2170 0.2219 0.1924 0.0742 0.1897 0.0923 0.0492 0.1228 0.1170 0.1102 15.1% 17.6% 14.6%
FCF Margin 0.0322 0.0081 0.0477 0.0528 0.0464 0.0222 0.0483 0.0714 0.0488 0.0543 0.0467 0.0473 0.1451 0.0613 0.0522 0.1392 0.1068 -0.1083 -0.0422 0.0303 0.0691 0.0328 -0.0169 0.0662 0.0465 0.0878 0.0385 0.0167 -0.0376 0.0764 0.0517 4.9% 5.8% 16.0%
Constraint Matrix
Value Drivers RDSA LN BP LN FP EPA XOM US CVX US ENI IM ENGI FP COP US EQNR NO 857 HK 386 HK REP SM PETR4 BZ SU CN IMO CN ECOPETL CB 883 HK ROSN RU GAZP RU LKOH RU CVE CN SIBN RU YPFD AR HSE CN MPC US OMV AV GALP PL PSX US RIL IN PTT TB MOL HB Value Driver Upper Bound 15%
Exp. Rev. Growth 5.1% 6.8% 16.7% 13.8% 17.9% 10.3% 0.8% 13.2% 10.8% 1.8% 1.1% 10.2% 2.5% 8.0% 5.7% 3.0% 13.9% 3.5% 2.7% -1.1% 3.4% 3.4% -6.0% -1.2% 36.2% 20.9% 12.5% 1.0% 14.0% 4.2% -2.1% Exp. Rev. Growth Lower Bound 0%
Constraint Matrix
Gross Profit Margin 17.5% 16.0% 34.7% 11.3% 10.4% 29.7% 43.9% 25.8% 49.8% 20.4% 23.8% 23.0% 35.4% 62.1% 15.4% 39.9% 53.5% 48.7% 57.8% 37.9% 46.7% 22.5% 16.1% 12.5% 7.8% 29.2% 19.0% 9.4% 33.3% 15.4% 28.0% Gross Profit Margin Lower Bound 8%
Constraint Matrix
EBITDA Margin 13.6% 9.1% 15.1% 14.4% 21.2% 24.7% 13.8% 37.2% 34.5% 17.5% 8.8% 12.6% 28.6% 34.9% 11.8% 45.0% 57.1% 22.5% 26.6% 13.8% 15.2% 26.0% 31.6% 23.3% 8.1% 26.6% 15.5% 4.7% 15.9% 16.8% 15.6% EBITDA Margin Lower Bound 8%
Constraint Matrix
EBIT Margin 5.8% 4.5% 8.3% 6.7% 8.9% 6.3% 1.8% 13.3% 6.4% 3.5% 3.2% 6.2% 5.9% 11.5% 4.0% 17.8% 15.8% 9.2% 13.7% 7.3% -5.0% 15.7% 8.2% 8.6% 2.8% 9.9% 6.3% 3.7% 7.7% 6.2% 6.5% EBIT Margin Lower Bound 3%
Constraint Matrix
OCF Margin 9.6% 7.5% 12.7% 12.5% 18.1% 17.2% 13.8% 33.4% 23.2% 16.3% 8.7% 8.7% 27.3% 26.4% 12.3% 34.3% 49.6% 13.0% 22.1% 11.4% 12.9% 21.7% 22.2% 19.2% 7.4% 19.0% 9.2% 4.9% 12.3% 11.7% 11.0% OCF Margin Lower Bound 5%
Analyst: Kevin Heymann, ASK Research

Constraint Matrix
FCF Margin 3.2% 0.8% 4.8% 5.3% 4.6% 2.2% 4.8% 7.1% 4.9% 5.4% 4.7% 4.7% 14.5% 6.1% 5.2% 13.9% 10.7% -10.8% -4.2% 3.0% 6.9% 3.3% -1.7% 6.6% 4.7% 8.8% 3.8% 1.7% -3.8% 7.6% 5.2% FCF Margin Lower Bound 0%
Value Drivers RDSA LN BP LN FP EPA XOM US CVX US ENI IM ENGI FP COP US EQNR NO 857 HK 386 HK REP SM PETR4 BZ SU CN IMO CN ECOPETL CB 883 HK ROSN RU GAZP RU LKOH RU CVE CN SIBN RU YPFD AR HSE CN MPC US OMV AV GALP PL PSX US RIL IN PTT TB MOL HB
Exp. Rev. Growth - 1 0 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 0 0 0 0 1 1 1 1 0
Gross Profit Margin - 1 1 1 1 1 0 1 0 1 1 1 0 0 1 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1
EBITDA Margin - 1 1 1 1 1 1 0 0 1 1 1 0 0 1 0 0 1 0 1 1 0 0 1 1 0 1 0 1 1 1
EBIT Margin - 1 1 1 1 1 0 1 1 1 1 1 1 1 1 0 0 1 1 1 0 0 1 1 0 1 1 1 1 1 1
OCF Margin - 1 1 1 1 1 1 0 0 1 1 1 0 0 1 0 0 1 0 1 1 0 0 1 1 1 1 0 1 1 1
FCF Margin - 1 1 1 1 1 1 1 1 1 1 1 0 1 1 0 0 0 0 1 1 1 0 1 1 0 1 1 0 1 1
Total - 6 5 6 5 6 4 4 3 6 6 6 2 3 6 1 1 4 2 4 4 3 2 5 4 3 6 4 5 6 5
Company RDSA LN BP LN XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL PTT TB FP EPA CVX US HSE CN RIL IN MOL HB ENGI FP COP US ROSN RU LKOH RU CVE CN MPC US PSX US EQNR NO SU CN SIBN RU OMV AV PETR4 BZ GAZP RU YPFD RUECOPETL CB 883 HK
Ranking - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Scoring
6/6 BP LN XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL PTT TB
5/6 FP EPA CVX US HSE CN RIL IN MOL HB
4/6 ENGI FP COP US ROSN RU LKOH RU CVE CN MPC US PSX US
3/6 EQNR NO SU CN SIBN RU OMV AV
2/6 PETR4 BZ GAZP RU YPFD AR
1/6 ECOPETL CB 883 HK
0/6
9
8
7
6
5
4
3
2
1
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
Low (52 Week)

High (52 Week)
P/E Expected Value

Current Market Value
P/FCF Expected Value

50 Day Moving Average
200 Day Moving Average
Value
Average of Comparables Valuation

BP Plc
YPF SA
Eni SpA
Total SA
Engie SA
Repsol Sa
PTT PCL
EV/EBITDA Median Expected Value

Phillips 66
OMV AG
Direct Valuation
Market Valuation
Lukoil PJSC
Indirect Valuation
Equinor ASA
Ecopetrol SA
CNOOC Ltd
Chevron Corp
EV/EBITDA vs. Gross Profit Regression

EV/EBITDA vs. Gross Profit Regression
Gazprom PJSC
Imperial Oil Ltd
Husky Energy Inc
Reliance Industries
Suncor Energy Inc
ExxonMobil Corp
PetroChhina Co Ltd
Cenovus Energy Inc
MOL Hungarian Oil

Gazprom Neft PJSC
Rosneft Oil Co PJSC
As of 11/30/2018, in USD
Conoco Phillips Corp
Petroleo Brasileiro SA
Galp Energia SGPS SA

Marathon Petroleum Corp
China Petroleum & Chemical Co
68.08
73.76
58.32
80.38
73.11
54.85
66.44
62.47
58.55
73.86
60.40
In the Oil, Gas, & Diversified Energy Industry
Comparable Firms to Royal Dutch Shell
Comparison of Computed Valuation to Market
22 of 35
Direct Valuation
Five fundamental price multiples for the top eight ultra-prime comparables were obtained and placed into the table shown
below. Of the two tables, the first is an exhibit of the 12 prime comparables, while the second is an exhibit of the eight ultra-
prime comparables. Statistical means, medians, and differences were then calculated for each of the five price multiple rows.
For this analysis, the comp median P/FCF is the preferred multiple to use for our direct valuation as it has a small difference
between the mean and median. Additionally, P/FCF is a more comparable multiple than P/OCF as firms across the industry
differ vastly in capital structure. Thus, P/FCF allows for a more comparable valuation across the eight ultra-prime
comparables. Additionally, the comp median P/E ratio was used as it is the most commonly quoted price multiple.
Direct Valuation: Comparable Company Multiples
Trailing Twelve Months, as of 11/30/2018
RDSA LN BP LN XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL PTT TB FP EPA CVX US HSE CN MEAN MEDIAN DIFFERENCE
P/E 11.71 15.42 18.13 8.89 16.22 9.83 10.42 25.01 13.13 10.43 12.93 16.62 8.48 13.79 13.03 5.85%
P/BV 1.27 1.32 1.75 1.02 0.72 0.98 0.77 1.37 2.71 1.65 1.24 1.48 0.88 1.32 1.28 3.45%
P/TBV 1.45 1.85 1.75 1.08 0.79 0.99 0.92 1.43 3.15 1.82 1.62 1.52 0.92 1.49 1.48 0.79%
P/OCF 7.08 6.06 9.66 4.07 2.38 3.10 5.74 8.19 7.79 5.34 6.36 8.14 3.77 5.88 5.90 -0.28%
P/FCF 18.19 19.63 19.98 11.81 7.50 4.81 15.52 12.23 15.46 9.60 25.87 15.82 13.33 14.30 14.40 -0.68%
Direct Valuation: Comparable Company Multiples

RDSA LN BP LN XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL MEAN MEDIAN DIFFERENCE
P/E 11.71 15.42 18.13 8.89 16.22 9.83 10.42 25.01 13.13 14.63 14.28 2.50%
P/BV 1.27 1.32 1.75 1.02 0.72 0.98 0.77 1.37 2.71 1.33 1.17 13.68%
P/TBV 1.45 1.85 1.75 1.08 0.79 0.99 0.92 1.43 3.15 1.50 1.26 19.12%
P/OCF 7.08 6.06 9.66 4.07 2.38 3.10 5.74 8.19 7.79 5.87 5.90 -0.44%
P/FCF 18.19 19.63 19.98 11.81 7.50 4.81 15.52 12.23 15.46 13.37 13.85 -3.45%
Estimated share value was then computed using the comp median
Direct Share Value Estimate
P/FCF multiplied by Royal Dutch Shell’s TTM FCF. The same method
was used to compute an estimated share for based on comp median P/E TTM, in USD millions
ratios of the eight ultra-primes and Royal Dutch Shell’s TTM EPS. The P/FCF P/E
Company is currently trading at $60.40 per share. At $54.85, the Median of Comparables 13.85 14.28
estimated share value computed using P/FCF is roughly $5.50 off market TTM FCF or EPS 3.96 5.12
price. However, Royal Dutch Shell is just off TTM lows of $58.55
Estimated Share Value $ 54.85 $ 73.11
reached on November 23, 2018. Turning to the estimated share value for
the P/E, the difference between the mean and median for the P/E ratio of the eight ultra-primes was the highest of the five
price multiples at 5.85%. The P/E median of comparables is 2.5x higher than where the Company current trades, which is
why we arrive at a valuation roughly 20% higher than current market price.
Correlation & Regression Analysis (Direct Valuation)

Correlation analysis was conducted to estimate the share value based on the correlation of value drivers to the Company’s
respective price multiples. P/E and Gross Profit Margin have the highest absolute correlation with a correlation of -0.721.
Thus, approximately 72.1% of the increase in P/E can explain the decrease in Gross Profit Margin, and vice versa. A negative
correlation does not impede us from using it in our valuation.
Our valuation using the regression model yields an

expected share price of $80.38, a 33% increase to recent
close. We are wary of the significance of this regression
valuation due to its low R2 and deviance from current
market price.
P/E vs. Gross Profit Margin Share Value

TTM, in USD millions
Expected Regression P/E 15.70
TTM EPS $ 5.12
Expected Share Value $ 80.38

Indirect Valuation
An indirect valuation method using the same eight ultra-prime comparables firms was conducted. We sourced and placed
three enterprise value multiples, EV/S, EV/EBITDA, and EV/EBIT into the table below. EV/EBITDA is the industry
preferred valuation multiple. Additionally, the difference between the mean and median was low.
Indirect Valuation: Comparable Company Multiples
RDSA LN BP LN XOM US ENI IM 857 HK 386 HK REP SM IMO CN GALP PL MEAN MEDIAN DIFFERENCE
EV/S 0.85 0.60 1.35 0.83 0.79 0.31 0.66 1.10 0.90 0.82 0.88 -7.10%
EV/EBITDA 6.16 5.82 9.84 3.06 4.93 3.77 5.61 9.36 6.01 6.05 5.72 5.86%
EV/EBIT 10.68 13.16 20.26 4.75 14.40 7.95 8.74 20.54 8.62 12.30 9.95 23.64%
Royal Dutch Shell’s TTM EBITDA of $58,495 was then multiplied by the Indirect Enterprise Value Estimate
comp median multiple of the eight ultra-prime comparables to reach an
TTM, in USD millions
estimated enterprise value of $334,591. Comparatively, Royal Dutch Shell’s
enterprise value as of November 30, 2018 is $310,968. We are somewhat EV / EBITDA
confident in this estimated enterprise value as comparable firms trade at a Median of Comparables 5.72
similar EV/EBITDA multiple. The negative is the multiple can be distorted TTM EBITDA 58,495
by various occurrences in the market at any given time. Estimated Enterprise Value $ 334,591
To find the estimate share value, our estimated enterprise value computed on Indirect Share Value Estimate
the previous page was placed into a new table. Cash and Cash Equivalents TTM, in USD millions
were added back to the estimated enterprise value. Short and Long Term Estimated Enterprise Value $ 334,591
Debt, Pension Liabilities, Other Long Term Liabilities, Preferred Stock, and Plus: Cash and Cash Equivalents 20,312
Noncontrolling Interest, was subtracted out to reach an estimated equity Less: Short Term Debt (13,923)
market cap of $243,270. Dividing by 4,171 fully diluted shares outstanding as Less: Long Term Debt (64,455)
of the Q3 2018, we reach an estimated share value of $58.32. Although Royal Less: Pension Liabilities (13,247)
Dutch Shell executives derive a significant portion of their earnings through
Less: Other Long Term Liabilities (16,055)
option-based compensation, this compensation was not deemed material to
Less: Preferred Stock -
the valuation of estimated market cap. (3,953)
Less: Non-Controlling Interest
Estimated Market Cap $ 243,270
Correlation & Regression Analysis (Indirect) Fully Diluted Shares Outstanding 4,171
Correlation analysis was conducted to estimate a share value based on the Estimated Share Value $ 58.32
correlation of six value drivers to the three enterprise value multiples. This
correlation including Royal Dutch Shell and the eight-ultra prime comparables. EV/EBITDA and Gross Profit Margin have
the highest correlation. Approximately 88.3% of the increase in EV/EBITDA can explain the decrease in Gross Profit
Margin, and vice versa. Royal Dutch Shell’s TTM Gross Profit Margin of 17.5% gives us a forecasted EV/EBITDA of 6.82x.
Based on TTM EBITDA of $58,495 we calculate a $398,993 expected enterprise value. After adding back Cash and Cash
Equivalents and subtracting out Short and Long Term Debt, Pension Liabilities, Other Long Term Liabilities, Preferred Stock,
and Noncontrolling Interest, we derive an estimated market cap of $307,672. Thus, we arrive at an estimated share value of
$73.76 after dividing by 4,171 fully diluted shares outstanding. Given that our EV/EBITDA vs. Gross Profit Margin
statistical confidence level was only 77.9%, it is interesting to compute an Share Value Estimate
implied price per share close to other values we have previously computed. TTM, in USD millions
Expected Regression EV/EBITDA 6.82
RDS-A TTM EBITDA $ 58,495
Expected Enterprise Value 398,993
Plus: Cash and Cash Equivalents 20,312
Less: Short Term Debt (13,923)
Less: Long Term Debt (64,455)
Less: Pension Liabilities (13,247)
Less: Other Long Term Liabilities (16,055)
Less: Preferred Stock -
Less: Non-Controlling Interest (3,953)
Implied Equity Value (Market Cap) $ 307,672
Fully Diluted Shares Outstanding 4,171
Implied Price Per Share $ 73.76

ESTIMATION OF COST OF CAPITAL
Equity Cost of Capital
In preparation for a discounted cash flow model analysis, we dug into Royal Dutch Shell’s capital stack with the intention of
estimating the Company’s cost of equity and debt. Data was gathered for Royal Dutch Shell’s London and New York shares.
The London listed share, RDSA LN, was compared to the FTSE 100 over a two-year and ten-year horizon. The New York
listed share, RDS-A, was compared to the S&P 500 over a two-year and ten-year horizon. Additionally, both shares were
compared to the MSCI World Energy Sector Index to look for anomalies when modifying the market portfolio.
All Raw Beta findings are also shown with outliers removed as denoted by the ‘WIN’ for winsorization. The risk-free rate in all
four tables is the daily average of the 10-year UST constant maturity rate from November 2008 to November 2018. The
market risk premiums we decided to use in our computation are sourced from Damodaran Online. Both market risk
premiums are the average 10 YR CF yield for the U.S. and U.K. markets, respectively.
RDSA LN vs. FTSE 100 Index RDSA LN vs. MSCI World Energy Sector Index
As of 11/30/2018 As of 11/30/2018
Market Estimated Cost Market Estimated Cost
0.0051 Raw Beta Risk Free Raw Beta Risk Free
Risk of Equity 0.0051 Risk of Equity
2 YR 1.108 2.51% 7.14% 10.42% 2 YR 0.809 2.51% 7.14% 8.29%
10 YR 1.082 2.51% 7.14% 10.24% 10 YR 0.796 2.51% 7.14% 8.19%
2 YR WIN 1.131 2.51% 7.14% 10.59% 2 YR WIN 0.846 2.51% 7.14% 8.55%
10 YR WIN 1.041 2.51% 7.14% 9.94% 10 YR WIN 0.771 2.51% 7.14% 8.01%
RDS/A US vs. S&P 500 Index RDS/A US vs. MSCI World Energy Sector Index
As of 11/30/2018 As of 11/30/2018
Risk Free Market Estimated Cost Market Estimated Cost
Raw Beta Raw Beta Risk Free
Rate Risk of Equity Risk of Equity
2 YR 0.716 2.51% 6.64% 7.26% 2 YR 0.985 2.51% 6.64% 9.05%
10 YR 1.023 2.51% 6.64% 9.30% 10 YR 0.922 2.51% 6.64% 8.63%
2 YR WIN 0.771 2.51% 6.64% 7.63% 2 YR WIN 0.951 2.51% 6.64% 8.82%
10 YR WIN 1.024 2.51% 6.64% 9.31% 10 YR WIN 0.94 2.51% 6.64% 8.75%
For reference, Damodaran’s industry specific betas are tabulated below. According to our calculations Royal Dutch Shell has a
beta lower than the Oil/Gas (Integrated) industry average of around 1.30. Interestingly, the estimated cost of equity is much
lower when looking at the New York share vs. the London share over a two-year period. There is some increased market risk
premium in the U.K., but not enough to make up for the large spread shown between the two-year London and New York
listing. The ten-year approximations for both are much more consistent and we believe to be more representative of the true
cost of equity. We conclude a cost of equity estimation around the midpoint of the London and New York listings at 9.50%.
Damodaran's Unlevered Beta of Select Industries

Number of Levered Effective Unlevered Cash/Firm Unlevered Standard Deviation of 10 YR Standard Deviation
Industry Name D/E Ratio HiLo Risk
Firms Beta Tax Rate Beta Value Beta Equity of Operating Income
Oil/Gas (Integrated) 5 1.37 15.29% 10.96% 1.23 1.70% 1.25 0.3307 20.21% 61.70%
Oil/Gas (Production and Exploration) 311 1.26 41.91% 2.18% 0.95 4.89% 1.00 0.5978 78.88% 109.36%
Oil/Gas Distribution 16 1.21 93.43% 4.84% 0.71 1.53% 0.72 0.4481 62.79% 30.48%
Royal Dutch Shell’s projected cost of equity was also computed using a Cost of Equity Constant Growth Model
constant growth model. Taking the close price of $60.40 on November As of 11/30/2018
30, 2018 and projected Q3 2019 TTM EPS of $5.27, we calculate an
Current Equity Market Price $ 60.40
implied cost of equity of 11.73%. As this is a market-based calculation, it
is subject to constant fluctuation. By this measure we arrive at a much Q3 2018 TTM EPS 5.12
higher implied cost of equity than other CAPM estimates calculated Projected Q3 2019 TTM EPS 5.27
above. It is however closer to the Bloomberg Intelligence estimated cost Projected Long Term Growth Rate 3.00%
of equity of 12.60% than our CAPM estimates. Implied Cost of Equity 11.73%

ESTIMATION OF COST OF CAPITAL
Debt Cost of Capital
Royal Dutch Shell has 41 corporate bonds outstanding as of November 30, 2018. Debt issuances are run through the Shell
International Finance BV entity. Of the 41 corporate bonds outstanding, 8 have maturities of 7-15 years. Three of these
issuances have maturities of 10 years. This is the ideal maturity length for estimating our debt cost of capital in comparison to
our 10-year beta estimates and the 10-year UST as the risk-free rate. The Company’s approximate cost of issuing 10-year debt
is 3.90%. Royal Dutch Shell has a robust credit rating and as such can issue option embedded corporate debt in Q4 2018 at
approximately 80bps above the risk-free rate.
Royal Dutch Shell Corporate Bonds of 7-15 YR Maturity
Ask Yield Bid Yield to Coupon
Name Ticker Coupon Maturity Issue Date S&P Maturity Type Bid Price Ask Price Currency
to Maturity Maturity Type
Shell International Finance BV RDSALN 3.875 11/13/2028 11/13/2018 3.9011 3.9511 AA- CALLABLE 99.377 99.785 USD FIXED
Shell International Finance BV RDSALN 2.5 9/12/2026 9/12/2016 3.8875 3.9121 AA- AT MATURITY 90.6 90.755 USD FIXED
Shell International Finance BV RDSALN 2.875 5/10/2026 5/10/2016 3.8398 3.8836 AA- AT MATURITY 93.532 93.803 USD FIXED
Shell International Finance BV RDSALN 0.75 8/15/2028 8/15/2016 1.3311 1.3915 AA- AT MATURITY 94.212 94.74 EUR FIXED
Shell International Finance BV RDSALN 0.875 8/21/2028 8/21/2015 0.6485 0.6986 AA- AT MATURITY 101.652 102.127 CHF FIXED
An item to note is that the Company’s two 10-year issuances in 2016 came at times of historically low interest rates. Global
quantitative easing growth has tapered over the past few years, and central banks have become more hawkish in terms of
raising rates. Going forward, we believe Royal Dutch Shell’s cost of issuing debt will increase in line with other debt issuing
entities.
Weighted Average Cost of Capital

Royal Dutch Shell’s WACC was approximate using our estimates of the Company’s cost of equity and cost of debt. The most
recent quarter’s book values were used for both equity and debt weights. As shown in the table below, our calculations shown
a weighted average cost of capital of 7.58%. For comparison, Bloomberg Intelligence calculates a market based WACC of
10.00%. On the adjacent page in the DISCOUNTED CASH FLOW ANALYSIS & VALUATION section, we show the
Bloomberg Intelligence estimation of Royal Dutch Shell’s WACC.
We believe our computed Company WACC to be low for multiple reasons. First, global headwinds and increased market
volatility so far in Q4 2018 have increased firms cost of operations. Second, Royal Dutch Shell’s market value of equity is
$268.4bn as of November 30, 2018, a significant deviation from book value. Finally, the Company continues to decrease its
debt load, which will cause the Company’s WACC to increase over time.
WACC Estimate for Royal Dutch Shell
At Book Value, as of September 30, 2018, in USD millions
Before Tax After Tax
Value Weight Weight x Cost
Cost Cost[1]
Equity 197,533 71.59% 9.50% - 6.80%
Debt 78,378 28.41% 3.90% 2.75% 0.78%
Total 275,911 100.00% - - 7.58%
[1] Assumes a TTM average effective tax rate across for the Company of 29.38% (Source: Thompson Reuters).
Given these factors, we believe a 1.00-1.25% premium to our computed WACC is

Firm Debt Ratios
realistic. Our opinion is that Bloomberg Intelligence’s WACC estimation is too high
with an assumed cost of equity of 12.60%. We believe our cost of equity calculation At Book Value, as of September 30,
and debt/equity weights deliver a more in-depth evaluation of the Company’s true 2018, in USD millions
WACC. Thus, a WACC of 8.50% is a sensible and valid approximation of the Total Cash 19,112
Company’s true WACC. Short Term Debt 13,923
Long Term Debt 64,455
Company specific debt ratios and select balance sheet items are displayed on the right. Total Debt 78,378
All the debt ratios, if used in place of a book value weight, would have the effect of
Total Stockholder's Equity 197,533
lowering our estimation of Royal Dutch Shell’s WACC. The estimation of the
Company’s WACC is already believed to be too low. Therefore, we elected to use the Debt to Equity 39.68%
Q3 2018 book value of debt and equity as it is the most recent stable indicator of Net Debt to Equity 30.00%
capital structure. Cash to Debt 24.38%
Royal Dutch Shell Plc 2011 2012 2013 2014 2015 2016 2017 2018
Historical Operating Statement FY 12/31 FY 12/31 FY 12/31 FY 12/31 FY 12/31 FY 12/31 FY 12/31 TTM 9/30 Historical CAGR[2] Historical Average[2]
Revenue 470171 467153 451235 421105 264960 233591 305179 371573 7 Year 3 Year 7 Year 3 Year
Revenue Growth (%) - -0.6% -3.4% -6.7% -37.1% -11.8% 30.6% 29.0% -3.4% 13.1% 0.0% 2.7%
EBITDA 50635 55012 47981 40392 22912 28116 46606 50491

EBITDA Margin 10.8% 11.8% 10.6% 9.6% 8.6% 12.0% 15.3% 13.6% 0.0% 33.3% 11.5% 12.4%
Depreciation & Amortization 9898 12005 11865 14535 22082 23395 26223 15707
D&A/Sales 2.1% 2.6% 2.6% 3.5% 8.3% 10.0% 8.6% 4.2% 7.1% -11.7% 5.2% 7.8%

EBIT 40737 43007 36116 25857 830 4721 20383 34784
EBIT Margin 8.7% 9.2% 8.0% 6.1% 0.3% 2.0% 6.7% 9.4% -2.3% 288.9% 6.3% 4.6%
Taxes[1] 24475 23552 17066 13584 -153 829 4695 12069

Effective Tax Rate 60.1% 54.8% 47.3% 52.5% -18.4% 17.6% 23.0% 34.7% -9.9% 288.9% 33.9% 14.2%
EBIAT 16262 19455 19050 12273 983 3892 15688 22715

EBIAT Margin 3.5% 4.2% 4.2% 2.9% 0.4% 1.7% 5.1% 6.1% 5.1% 213.2% 3.5% 3.3%
D&A/Sales 2.1% 2.6% 2.6% 3.5% 8.3% 10.0% 8.6% 4.2% 7.1% -11.7% 5.2% 7.8%
Capital Expenditures (19311) (26230) (38933) (21891) (21411) (20044) (12037) (16459)
CapEx/Sales -4.1% -5.6% -8.6% -5.2% -8.1% -8.6% -3.9% -4.4% -2.3% -9.1% -6.1% -6.3%
Less: Inc (Dec) in Net Working Capital (6471) 3391 2988 6405 5521 (6289) (3158) (6780)
NWC/Sales -1.4% 0.7% 0.7% 1.5% 2.1% -2.7% -1.0% -1.8% -0.7% 7.8% -0.2% -0.9%
Unlevered Free Cash Flow to the Firm 378 8621 -5030 11322 7175 954 26716 15183
Unlevered FCF to Firm/Sales 0.1% 1.8% -1.1% 2.7% 2.7% 0.4% 8.8% 4.1% 72.8% 31.3% 2.4% 4.0%
[1] Royal Dutch Shell operates internationally and is subject to varying degrees of taxation. After the 2014-2015 oil crisis firms in the industry were able to utilize NOL carryforwards,
distorting the average effective tax rate.
[2] 7 Year is defined as the period from 2011 to 2018. 3 Year is defined as the period from 2015 to 2018.
DISCOUNTED CASH FLOW ANALYSIS & VALUATION
27 of 35
Royal Dutch Shell Plc 2018 2019 2020 2021 2022 2023 Revenue: Growth in the industry has historically been cyclical.
The 2014-2015 oil crisis forced oil majors to pare back excessive
5 Year Discounted Cash Flow Forecast FY 12/31 FY 12/31 FY 12/31 FY 12/31 FY 12/31 FY 12/31 capital expenditure and divest non-performing assets to focus on
core assets. Royal Dutch Shell has arguably become more akin to
Revenue[1] 383133 411868 442758 469324 497483 522357 an integrated utility than the traditional integrated oil firm.
% Revenue Growth 29.0% 7.5% 7.5% 6.0% 6.0% 5.0% Average revenue growth from 2016-2018 YTD was 15.9%. The
acquisition of BG Group in early 2016 boosted revenue
EBITDA[1] 59608 55602 59772 65705 69648 78354 substantially. Additionally, the global rebound of commodity and
EBITDA Margin 15.6% 13.5% 13.5% 14.0% 14.0% 15.0% the pruning of non-core assets has fueled this growth. 7.5% growth
in 2019 and 2020, and 6% growth in 2021 and 2022, is both
conservative and aggressive, given robust firm specific and
Depreciation & Amortization 24824 18534 19924 23466 24874 26118 industry growth in recent years. On the flipside, as the Company
D&A/Sales 6.5% 4.5% 4.5% 5.0% 5.0% 5.0% diversifies away from oil, it has the lowest proven oil reserves of

the oil majors. Lowering revenue growth to 5% in 2023, and long
EBIT[1] 34784 37068 39848 42239 44773 52236 term growth at 3.0%, is indicative of the Company's challenge to
grow revenue massively at its scale.
EBIT Margin 9.1% 9.0% 9.0% 9.0% 9.0% 10.0%
Taxes[2] 10219 10891 11707 12410 13154 15347 EBITDA: Company EBITDA margins have averaged 12.4% and
Effective Tax Rate 29.4% 29.4% 29.4% 29.4% 29.4% 29.4% 11.5% over the past 3 and 7 years, respectively. Top rival
ExxonMobil has higher average EBITDA margins in part due to
their much larger debt pile. Royal Dutch Shell has indicated its
EBIAT 24564 26178 28141 29829 31619 36889 goal to reduce debt gearing ratio to 20% in the near term (ratio at
EBIAT Margin 6.4% 6.4% 6.4% 6.4% 6.4% 7.1% 23.8% as of 9/30/18). Therefore, EBITDA margins should hover
between 12-15% going forward.
Depreciation & Amortization 24824 18534 19924 23466 24874 26118
D&A/Sales 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% Depreciation & Amortization: As Royal Dutch Shell pares back
capital expenditures, we expect D&A to fall as we have seen so far
Capital Expenditures (16459) (18534) (19924) (23466) (24874) (26118) TTM in 2018. Company D&A/Sales has averaged 5.2% and 7.8%
CapEx/Sales -4.3% -4.5% -4.5% -5.0% -5.0% -5.0% over the past 3 and 7 years, respectively. D&A should fall back
towards pre oil crisis levels of 3-5%, although will stay above 3%
as a result of the Company's ongoing capital expenditure plan.
Less: Inc (Dec) in Net Working Capital (6780) (8237) (8855) (9386) (9950) (10447)
NWC/Sales -1.8% -2.0% -2.0% -2.0% -2.0% -2.0%
EBIT: Forecasted margins are expected to fall in line with pre-
crisis (2011-2013) EBIT Margins of roughly 9-10% as a result of
Unlevered Free Cash Flow to the Firm 26149 17940 19286 20443 21669 26442 lower Depreciation & Amortization. Comparatively, ExxonMobil
Unlevered FCF to Firm/Sales 6.8% 4.4% 4.4% 4.4% 4.4% 5.1% has historically posted even higher pre-crisis EBIT Margins,
averaging 8.9% between 2011-2013.
Present Value of Unlevered FCF to the Firm[3] 17223 17064 16671 16287 18317
Weighted Average Cost of Capital 8.5% 8.5% 8.5% 8.5% 8.5% Taxes: See note [2]. Given that Royal Dutch Shell operates
[1] 2018 FY 12/31 operating financial assumptions come from aggregate analyst estimates. internationally, and only generates roughly 20% of total revenue in
[2] Royal Dutch Shell operates internationally and is subject to varying degrees of taxation. After the 2014-2015 oil crisis firms in the industry were the U.S., we feel it is inappropriate to use the U.S. C-Corp tax rate
able to utilize NOL carryforwards, distorting the average effective tax rate. of 21% across the board. TTM company effective tax rate is
[3] Present value calculation assumes the mid-year convention. 29.38%. Industry average is 26.42% and sector average is 31.38%.
Exit Multiple: EV/EBITDAX is the industry Exit Multiple: EV/EBITDAX is the industry standard multiple, the "X" denoting Capital Expenditures: Royal Dutch Shell plans to keep capital
Exploration & Production (E&P) costs. Integrated oil companies, primarily the oil majors, include E&P costs in Depreciation & Depletion. expenditure budgeting between $20-30bn until 2020. We expect
Thus, EV/EBITDA is the multiple we used. Further, EV/EBITDA had a low difference between the mean and median. Comparable the Company will continue to stay away from excessive
companies in the space trade historically for approximately 5.50x to 6.50x TTM EV/EBITDA. We took the mid range of this band to Exploration & Production (E&P) spend, and focus short term
assume a 6.00x TTM EBITDA to forecast an estimated terminal enterprise value. investments that produce strong cash flow and strategic mergers to
fuel revenue growth.
Gordon Growth Model: The Company has grown revenue tremendously since 2016 partially resultant of the $70bn BG Group acquisition.
We believe management is on the correct strategic track and the Company will continue to generate robust revenue growth. Given the
revenue volatility seen in the industry due to fluctuations in commodity prices, as well as slowing global GDP growth, we see 3.5% long term Net Working Capital: As the Company stays away from past
growth as a ceiling growth target uneconomical capital spend, we believe NWC/Sales will stay
negative for the foreseeable future. Average NWC/Sales has come
in at -0.9% and -0.2% over the past 3 and 7 years, respectively.
28 of 35
Comparison of Terminal Value and Price Per Share: Exit Multiple vs. Gordon Growth
Terminal Value: Exit Multiple Terminal Value: Gordon Growth
Forecasted 2023 EBITDA $ 78,354 Terminal Free Cash Flow $ 26,442
Mid Range EV/EBITDA of Comps 6.00 Terminal WACC 8.50%
Estimated Terminal Enterprise Value $ 470,122 Long Term Growth Rate 3.00%
Estimated Terminal Enterprise Value $ 495,181
Present Value of Terminal Enterprise Value $ 312,652
Present Value of Unlevered FCF to the Firm 85,563 Present Value of Terminal Value $ 329,318
Estimated Present Enterprise Value $ 398,215 Present Value of Unlevered FCF to the Firm 85,563
Estimated Present Enterprise Value $ 414,881
Implied Equity Value: Exit Multiple Implied Equity Value: Gordon Growth
Estimated Present Enterprise Value $ 398,215 Estimated Enterprise Value $ 414,881
Plus: Cash and Cash Equivalents 20,312 Plus: Cash and Cash Equivalents 20,312
Less: Short Term Debt (13,923) Less: Short Term Debt (13,923)
Less: Long Term Debt (64,455) Less: Long Term Debt (64,455)
Less: Pension Liabilities (13,247) Less: Pension Liabilities (13,247)
Less: Other Long Term Liabilities (16,055) Less: Other Long Term Liabilities (16,055)
Less: Preferred Stock - Less: Preferred Stock -
Less: Non-Controlling Interest (3,953) Less: Non-Controlling Interest (3,953)
Implied Equity Value (Market Cap) $ 306,894 Implied Equity Value (Market Cap) $ 323,560
Fully Diluted Shares Outstanding 4,171 Fully Diluted Shares Outstanding 4,171
Implied Price Per Share $ 73.58 Implied Price Per Share $ 77.57
Items to Note
▪ As of November 30, 2018, Royal Dutch Shell’s Class A Share equity market value is $60.40.
▪ The industry standard EV/EBITDA multiple valuation method yields an intrinsic share price of $73.58.
▪ The Gordon Growth valuation method yields a higher valuation of $77.57 per share, even with a relatively
conservative long-term growth rate.
▪ Royal Dutch Shell is a stable company that has conducted
operations for more than a century. Thus, we do not believe Comparison of Computed Valuation to
the H-Model to be as accurate a predictor of value as the Market Value
Gordon Growth valuation method.
▪ Our EV/EBITDA valuation represents a 21.82% premium As of 11/30/2018, in USD
to the recently traded price. Reasons for the deviation include Market Valuation
normal market fluctuations, the recent downturn in global Current Market Value 60.40
commodity prices weakening the market price of a share, and High (52 Week) 73.86
DCF assumptions that are potentially too sanguine.
▪ Our Gordon Growth valuation represents a 28.43% premium Low (52 Week) 58.55
to the recently traded price. Reasons for the deviation include 50 Day Moving Average 62.47
normal market fluctuations, the Company’s low estimated 200 Day Moving Average 66.44
WACC (that was based off Q3 2018 book value capital
weights), and DCF assumptions that are potentially too DCF Valuation
bullish. EBITDA Exit Multiple 73.58
▪ We are extremely confident in our DCF assumptions when Gordon Growth Model 77.57
thinking of the Company’s positioning in the oil, gas, &
diversified energy industry and a positive analysis of growth Average of DCF Valuation 75.58
prospects.

Sensitivity Analysis of Adjusted Terminal Value: Exit Multiple vs. Gordon Growth
Sensitivity Analysis of Terminal Value: Exit Multiple

EV/EBITDA Exit Multiple
$ 73.58 4.50 4.75 5.00 5.25 5.50 5.75 6.00 6.25 6.50 6.75 7.00 7.25 7.50
7.00% 59.17 62.52 65.87 69.22 72.57 75.92 79.27 82.61 85.96 89.31 92.66 96.01 99.36
7.25% 58.43 61.74 65.05 68.36 71.67 74.97 78.28 81.59 84.90 88.21 91.52 94.83 98.14
7.50% 57.69 60.96 64.23 67.50 70.77 74.05 77.32 80.59 83.86 87.13 90.40 93.67 96.94
7.75% 56.96 60.20 63.43 66.66 69.90 73.13 76.36 79.60 82.83 86.06 89.30 92.53 95.76
8.00% 56.24 59.44 62.64 65.83 69.03 72.23 75.42 78.62 81.81 85.01 88.21 91.40 94.60
8.25% 55.54 58.70 61.86 65.01 68.17 71.33 74.49 77.65 80.81 83.97 87.13 90.29 93.45
8.50% 54.84 57.96 61.08 64.21 67.33 70.45 73.58 76.70 79.82 82.95 86.07 89.19 92.32
8.75% 54.15 57.24 60.32 63.41 66.50 69.59 72.68 75.76 78.85 81.94 85.03 88.11 91.20
9.00% 53.47 56.52 59.58 62.63 65.68 68.73 71.78 74.84 77.89 80.94 83.99 87.05 90.10
9.25% 52.80 55.82 58.84 61.85 64.87 67.89 70.91 73.92 76.94 79.96 82.98 85.99 89.01
9.50% 52.14 55.12 58.11 61.09 64.07 67.06 70.04 73.02 76.01 78.99 81.97 84.96 87.94
9.75% 51.49 54.44 57.39 60.34 63.29 66.24 69.18 72.13 75.08 78.03 80.98 83.93 86.88
10.00% 50.85 53.76 56.68 59.59 62.51 65.43 68.34 71.26 74.17 77.09 80.01 82.92 85.84
10.25% 50.21 53.09 55.98 58.86 61.74 64.63 67.51 70.39 73.28 76.16 79.04 81.93 84.81
Sensitivty Analysis of Terminal Value: Gordon Growth

Long Term Growth Rate
$ 77.57 2.10% 2.25% 2.40% 2.55% 2.70% 2.85% 3.00% 3.15% 3.30% 3.45% 3.60% 3.75% 3.90%
7.00% 86.47 89.37 92.47 95.78 99.31 103.11 107.18 111.58 116.33 121.48 127.08 133.21 139.92
7.25% 82.20 84.84 87.63 90.61 93.78 97.17 100.80 104.69 108.88 113.39 118.28 123.59 129.38
7.50% 78.33 80.73 83.27 85.96 88.82 91.87 95.12 98.59 102.31 106.31 110.61 115.26 120.30
7.75% 74.81 77.00 79.31 81.76 84.36 87.11 90.04 93.16 96.49 100.05 103.87 107.97 112.40
8.00% 71.58 73.59 75.71 77.95 80.31 82.82 85.47 88.29 91.28 94.48 97.89 101.54 105.46
8.25% 68.61 70.47 72.42 74.47 76.63 78.92 81.33 83.89 86.60 89.48 92.55 95.82 99.32
8.50% 65.88 67.59 69.39 71.28 73.27 75.37 77.57 79.91 82.37 84.98 87.76 90.71 93.85
8.75% 63.35 64.94 66.61 68.35 70.19 72.11 74.14 76.28 78.53 80.91 83.43 86.10 88.94
9.00% 61.00 62.48 64.03 65.65 67.35 69.13 70.99 72.96 75.03 77.20 79.50 81.94 84.51
9.25% 58.82 60.20 61.64 63.15 64.72 66.37 68.10 69.91 71.81 73.82 75.93 78.15 80.50
9.50% 56.79 58.08 59.42 60.83 62.29 63.82 65.43 67.10 68.86 70.71 72.65 74.69 76.84
9.75% 54.89 56.10 57.36 58.67 60.04 61.46 62.95 64.51 66.14 67.85 69.64 71.52 73.50
10.00% 53.11 54.24 55.42 56.65 57.93 59.27 60.65 62.11 63.62 65.21 66.87 68.61 70.43
10.25% 51.44 52.51 53.62 54.77 55.97 57.22 58.52 59.87 61.28 62.76 64.30 65.91 67.60
Items to Note
▪ The computed valuation share price for EV/EBITDA and Gordon Growth are bolded and based on the forecasted
exit multiple or long-term growth rate.
▪ For EV/EBITDA, the most positive scenario yields a share price of $99.36 at a WACC of 7.00% and an
EV/EBITDA exit multiple of 7.50x, all else equal. The most negative scenario yields a share price of $50.21 at a
WACC of 10.25% and an EV/EBITDA exit multiple of 3.00x, ceteris paribus.
▪ On the flipside, the Gordon Growth sensitivity analysis yields a share price of $139.92 in the most favorable instance.
WACC would have to come in at 7.00% and the long-term growth rate would have to be 3.90%, all else equal. The
most unfavorable instance sees a share price of $51.44 at a WACC of 10.25% and a long-term growth rate of 2.10%,
ceteris paribus.
▪ The two variables in the above sensitivity analysis of our Gordon Growth valuation, WACC and long-term growth
rate, are shown with room to increase, respectively, due to various economic developments. On the other hand, the
range our sensitivity analysis is within a narrow band around our forecasted WACC, multiple, and growth rate. This is
so we stay realistic in the amount of variance that is displayed.
▪ Various economic developments include rising U.S. and global GDP, increasing inflation in the U.S., and the dual
headwinds of tapering of global quantitative easing and rising interbank interest rates. We expect firm WACC’s across
all U.S. business to increase resultant of rising interest rates and the reduced value of the interest tax shield.

VALUATION DISCUSSION: RECONCILLIATION OF ESTIMATES
Concluding Thoughts
We conclude that a price target of $72.50 is reasonable for Comparison of Computed Valuation to Market Value
Royal Dutch Shell to achieve within the next twelve
months. As of 11/30/2018, in USD
Market Valuation
Royal Dutch Shell has quite a compelling growth story. As Current Market Value 60.40
we’ve explored in the RESEARCH & DEVELOPMENT, High (52 Week) 73.86
NEW PRODUCTS, & GROWTH section, the Company Low (52 Week) 58.55
continues to innovate and spend in a prudent manner. Since 50 Day Moving Average 62.47
the 2014-2015 oil crisis and the acquisition of BG Group in 200 Day Moving Average 66.44
2016, Royal Dutch Shell has reported rapidly improving
Direct Valuation
financials. Further, the Company is led by keen, fast-acting
management that has already responded and will continue to P/FCF Expected Value 54.85
respond to concerns over industry facilitated greenhouse P/E Expected Value 73.11
emissions, effects of business operations on the environment, EV/EBITDA vs. Gross Profit Regression 80.38
and the approaching energy transition. All these risk factors, Indirect Valuation
along with other risk factors listed in the GOVERNANCE, EV/EBITDA Median Expected Value 58.32
BRAND, & RISK FACTORS section, have been addressed
EV/EBITDA vs. Gross Profit Regression 73.76
and mitigated to the best of the Company’s ability.
DCF Valuation
The Company is currently trading below its 52-week high of EBITDA Exit Multiple 73.58
$73.86, which was achieved less than six months on May 21, Gordon Growth Model 77.57
2018. Moreover, Royal Dutch Shell is trading just off its 52-
Valuation Statistics
week low of $58.55 where it closed on November 23, 2018. We
believe our DCF valuation is the best forecast of the Average of Comparables & DCF Valuation 70.22
Company’s true equity value. Comparables analysis has the Median of Comparables & DCF Valuation 73.58
drawback of pulling all companies towards the mean or median or a comparable group, whereas for industry leaders such as
Royal Dutch Shell we should expect multiples that are above the average or median of the selected comparable group. Our
DCF valuation also allows us to tune projections in a more effective way than comparables analysis allows for.
Royal Dutch Shell currently pays a 6.21% TTM dividend yield, up from 5.60% TTM in Q2 2018. Although the Company has
frozen dividend increases since January 2015, Royal Dutch Shell has not cut its dividend in over 70 years since the World War
II era. This level of consistency is extraordinarily uncommon in any industry, let alone in the cyclical oil, gas, & diversified
energy industry. The consistency tells us that the business model, operational excellence, and plan execution of the Company
has been time-tested through the ebbs and flows of the industry and global economy.
The Company vs. Industry Peers

Royal Dutch Shell has produced stronger financial and
operating results than competitors BP and ExxonMobil
in recent years, all while maintaining a debt light capital
structure and disposal of non-core and
underperforming assets. The gap between industry
leader Royal Dutch Shell and ExxonMobil has
narrowed substantially over the last decade as depicted
by the graph on the right-hand side of the page.
The gap is now around $85bn as of November 30, 2018

and continues to trend lower. Over the last six months,
the gap has hovered +/- $15bn around $85bn, which ExxonMobil and Royal Dutch Shell market capitalization comparison over the last ten years. (Source:
we believe is a blip due to overconcern about Royal Bloomberg)
Dutch Shell’s Q3 2018 average production decline of approximately 2% and recent volatility spikes in the commodity market.
In our opinion, the market failed to react positively to Royal Dutch Shell’s increase in 2018 YTD revenue growth of 21.8%
and 2018 Q3 YoY operating cash flow gains of 59.5%.
For the above reasons, we conclude a price target of $72.50 to be achieved by December 2019.

HISTORICAL OPERATING FINANCIALS
BP Plc 2011 2012 2013 2014 2015 2016 2017 2018
Revenue Growth (%) - 0.1% 0.9% -6.7% -37.0% -17.9% 31.3% 28.1% -3.7% 10.2% -0.2% 1.1%
EBITDA 39692 32056 43549 29646 23273 16846 25325 33302

EBITDA Margin 10.6% 8.5% 11.5% 8.4% 10.4% 9.2% 10.5% 11.4% -2.6% 13.9% 10.1% 10.4%
D&A/Sales 4.5% 4.2% 8.1% 5.3% 7.8% 7.6% 6.3% 6.1% 0.7% 0.4% 6.2% 6.9%
EBIT 22884 16155 12784 10891 5865 3021 10160 15680

EBIT Margin 6.1% 4.3% 3.4% 3.1% 2.6% 1.7% 4.2% 5.4% -5.4% 43.0% 3.8% 3.5%
Taxes[1] 12737 6880 6463 947 (3171) (2467) 3712 6647

Effective Tax Rate 55.7% 42.6% 50.6% 8.7% -54.1% -81.7% 36.5% 42.4% -9.2% 43.0% 12.6% -14.2%
EBIAT 10147 9275 6321 9944 9036 5488 6448 9033

EBIAT Margin 2.7% 2.5% 1.7% 2.8% 4.1% 3.0% 2.7% 3.1% -1.7% 0.0% 2.8% 3.2%
D&A/Sales 4.5% 4.2% 8.1% 5.3% 7.8% 7.6% 6.3% 6.1% 0.7% 0.4% 6.2% 6.9%
CapEx/Sales -3.8% -3.5% -1.7% -5.9% -7.9% -8.4% -5.7% -4.3% -1.9% -11.4% -5.1% -6.6%
Less: Inc (Dec) in Net Working Capital (19668) (6912) (6843) (6925) 843 (3198) (3352) (5601)
NWC/Sales -5.2% -1.8% -1.8% -2.0% 0.4% -1.7% -1.4% -1.9% 17.0% -99.1% -1.9% -1.2%
Unlevered Free Cash Flow to the Firm -7058 5034 23838 1048 9705 786 4635 8454
Unlevered FCF to Firm/Sales -1.9% 1.3% 6.3% 0.3% 4.4% 0.4% 1.9% 2.9% 2.7% -4.9% 2.0% 2.4%
[1] BP operates internationally and is subject to varying degrees of taxation. After the 2014-2015 oil crisis firms in the industry were able to utilize NOL carryforwards, distorting the
average effective tax rate.
ExxonMobil Corp 2011 2012 2013 2014 2015 2016 2017 2018
Revenue Growth (%) - -3.3% -6.9% -6.5% -35.1% -15.3% 18.2% 22.7% -6.4% 5.9% -3.7% -2.4%
EBITDA 69687 60538 57483 50965 30931 26669 34307 40032

EBITDA Margin 16.1% 14.4% 14.7% 14.0% 13.1% 13.3% 14.5% 14.4% -7.9% 9.8% 14.3% 13.8%
D&A/Sales 6.6% 5.6% 6.4% 5.1% 6.1% 8.3% 8.0% 7.7% -4.2% 15.3% 6.7% 7.5%
EBIT 41060 37255 32580 32251 16410 10066 15289 18572

EBIT Margin 9.5% 8.9% 8.3% 8.8% 6.9% 5.0% 6.4% 6.7% -11.1% 4.6% 7.6% 6.3%
[1]
Taxes 31051 31045 24263 18015 5415 (406) (1174) 2225
Effective Tax Rate 75.6% 83.3% 74.5% 55.9% 33.0% -4.0% -7.7% 12.0% -32.3% 4.6% 40.3% 8.3%
EBIAT 10009 6210 8317 14236 10995 10472 16463 16347

EBIAT Margin 2.3% 1.5% 2.1% 3.9% 4.6% 5.2% 6.9% 5.9% 7.5% 15.5% 4.1% 5.7%
D&A/Sales 6.6% 5.6% 6.4% 5.1% 6.1% 8.3% 8.0% 7.7% -4.2% 15.3% 6.7% 7.5%
CapEx/Sales -4.6% -6.4% -7.9% -7.9% -10.2% -5.9% -5.2% -4.8% -5.7% -19.4% -6.6% -6.5%
Less: Inc (Dec) in Net Working Capital (1012) 627 (4720) (4932) (3113) (1392) (649) (127)
NWC/Sales -0.2% 0.1% -1.2% -1.4% -1.3% -0.7% -0.3% 0.0% -26.5% -68.8% -0.6% -0.6%
Unlevered Free Cash Flow to the Firm 17782 3504 -2462 -899 -1698 13795 22533 24346
Unlevered FCF to Firm/Sales 4.1% 0.8% -0.6% -0.2% -0.7% 6.9% 9.5% 8.8% 4.8% 163.4% 3.6% 6.1%
[1] ExxonMobil operates internationally and is subject to varying degrees of taxation. After the 2014-2015 oil crisis firms in the industry were able to utilize NOL carryforwards,
distorting the average effective tax rate.

COMPARABLE FIRMS FINANCIALS
TARGET FIRM I II III IV V VI VII VIII IX X
RDSA LN BP LN FP EPA XOM US CVX US ENI IM ENGI FP COP US EQNR NO 857 HK 386 HK
Royal Dutch Shell Exxon Mobil Conoco PetroChina Co China
BP Plc Total SA Chevron Corp Eni SpA Engie SA Equinor ASA
Plc Corp Phillips Corp Ltd Petroleum &
Currency USD USD USD USD USD EUR USD USD USD USD USD
LTM Rev $ 371,573 $ 290,895 $ 179,236 $ 277,594 $ 153,331 $ 73,311 $ 73,465 $ 34,827 $ 73,944 $ 347,042 $ 401,414
LTM Date 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 12/31/2017 9/30/2018 9/30/2018 9/30/2018 9/30/2018
2 Year Revenue $ 395,594 $ 315,835 $ 217,311 $ 326,449 $ 188,463 $ 82,886 $ 74,678 $ 40,686 $ 84,072 $ 354,987 $ 407,185
2 Year Date 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019
LTM Gross Profit $ 65,029 $ 46,503 $ 62,285 $ 31,235 $ 15,938 $ 21,773 $ 32,242 $ 8,986 $ 36,835 $ 70,883 $ 95,419
LTM EBITDA $ 50,491 $ 33,302 $ 31,110 $ 40,032 $ 32,466 $ 18,111 $ 10,172 $ 12,949 $ 25,522 $ 60,583 $ 35,192
LTM EBIT $ 21,408 $ 15,680 $ 13,989 $ 18,572 $ 13,686 $ 4,586 $ 1,299 $ 4,634 $ 4,762 $ 11,993 $ 12,822
LTM OCF $ 35,565 $ 21,947 $ 22,678 $ 34,818 $ 27,697 $ 12,640 $ 10,121 $ 11,632 $ 17,152 $ 56,676 $ 34,945
LFY Disp $ 32,824 $ 18,931 $ 22,319 $ 30,066 $ 20,515 $ 10,117 $ 10,075 $ 7,077 $ 14,363 $ 52,810 $ 29,270
LFY Acq $ (20,845) $ (16,562) $ (13,767) $ (15,402) $ (13,404) $ (8,490) $ (6,529) $ (4,591) $ (10,755) $ (33,961) $ (10,511)
LFY FCF $ 11,979 $ 2,369 $ 8,552 $ 14,664 $ 7,111 $ 1,627 $ 3,546 $ 2,486 $ 3,608 $ 18,849 $ 18,759
Rev Forecast Mo. 15 15 15 15 15 15 24 15 15 15 15
Rev Forecast Yrs. 1.25 1.25 1.25 1.25 1.25 1.25 2 1.25 1.25 1.25 1.25
TARGET I II III IV V VI VII VIII IX X
China
Royal Dutch Shell Exxon Mobil Conoco PetroChina Co
BP Plc Total SA Chevron Corp Eni SpA Engie SA Equinor ASA Petroleum &
Plc Corp Phillips Corp Ltd
Chemical Corp
Value Drivers RDSA LN BP LN FP EPA XOM US CVX US ENI IM ENGI FP COP US EQNR NO 857 HK 386 HK
Exp. Rev. Growth 5.1% 6.8% 16.7% 13.8% 17.9% 10.3% 0.8% 13.2% 10.8% 1.8% 1.1%
Gross Profit Margin 17.5% 16.0% 34.7% 11.3% 10.4% 29.7% 43.9% 25.8% 49.8% 20.4% 23.8%
EBITDA Margin 13.6% 9.1% 15.1% 14.4% 21.2% 24.7% 13.8% 37.2% 34.5% 17.5% 8.8%
EBIT Margin 5.8% 4.5% 8.3% 6.7% 8.9% 6.3% 1.8% 13.3% 6.4% 3.5% 3.2%
OCF Margin 9.6% 7.5% 12.7% 12.5% 18.1% 17.2% 13.8% 33.4% 23.2% 16.3% 8.7%
FCF Margin 3.2% 0.8% 4.8% 5.3% 4.6% 2.2% 4.8% 7.1% 4.9% 5.4% 4.7%
TARGET FIRM XI XII XIII XIV XV XVI XVII XVIII XIX XX

RDSA LN REP SM PETR4 BZ SU CN IMO CN ECOPETL CB 883 HK ROSN RU GAZP RU LKOH RU CVE CN
Royal Dutch Shell Petroleo Suncor Energy Imperial Oil Rosneft Oil Co Cenovus
Repsol SA Ecopetrol SA CNOOC Ltd Gazprom PJSC Lukoil PJSC
Plc Brasileiro SA Inc Ltd PJSC Energy Inc
Currency USD EUR USD USD USD USD USD USD USD USD USD
LTM Rev $ 371,573 $ 48,092 $ 95,654 $ 30,380 $ 26,131 $ 22,301 $ 27,597 $ 127,269 $ 123,854 $ 117,717 $ 15,499
LTM Date 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 12/31/2017 9/30/2018 6/30/2018 9/30/2018 9/30/2018
2 Year Revenue $ 395,594 $ 54,311 $ 98,610 $ 33,446 $ 28,014 $ 23,145 $ 35,821 $ 132,846 $ 128,886 $ 116,050 $ 16,159
2 Year Date 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019
LTM Gross Profit $ 65,029 $ 11,061 $ 33,901 $ 18,852 $ 4,035 $ 8,903 $ 14,778 $ 61,919 $ 71,648 $ 44,616 $ 7,244
LTM EBITDA $ 50,491 $ 6,054 $ 27,355 $ 10,617 $ 3,096 $ 10,046 $ 15,748 $ 28,616 $ 32,896 $ 16,263 $ 2,348
LTM EBIT $ 21,408 $ 2,997 $ 5,627 $ 3,494 $ 1,041 $ 3,963 $ 4,349 $ 11,737 $ 16,961 $ 8,580 $ (779)
LTM OCF $ 35,565 $ 4,206 $ 26,123 $ 8,023 $ 3,220 $ 7,640 $ 13,693 $ 16,522 $ 27,417 $ 13,435 $ 2,002
LFY Disp $ 32,824 $ 4,576 $ 27,544 $ 6,912 $ 2,130 $ 5,067 $ 10,680 $ 2,024 $ 18,882 $ 12,340 $ 2,358
LFY Acq $ (20,845) $ (2,300) $ (13,664) $ (5,050) $ (766) $ (1,962) $ (7,732) $ (15,811) $ (24,107) $ (8,771) $ (1,287)
LFY FCF $ 11,979 $ 2,276 $ 13,880 $ 1,862 $ 1,365 $ 3,105 $ 2,947 $ (13,787) $ (5,225) $ 3,569 $ 1,071
Rev Forecast Mo. 15 15 15 15 15 15 24 15 18 15 15
Rev Forecast Yrs. 1.25 1.25 1.25 1.25 1.25 1.25 2.00 1.25 1.50 1.25 1.25
TARGET XI XII XIII XIV XV XV XV XV XV XV
Royal Dutch Shell Petroleo Suncor Energy Imperial Oil Rosneft Oil Co Cenovus
Repsol SA Ecopetrol SA CNOOC Ltd Gazprom PJSC Lukoil PJSC
Plc Brasileiro SA Inc Ltd PJSC Energy Inc
Value Drivers RDSA LN REP SM PETR4 BZ SU CN IMO CN ECOPETL CB 883 HK ROSN RU GAZP RU LKOH RU CVE CN
Exp. Rev. Growth 5.1% 10.2% 2.5% 8.0% 5.7% 3.0% 13.9% 3.5% 2.7% -1.1% 3.4%
Gross Profit Margin 17.5% 23.0% 35.4% 62% 15% 40% 54% 49% 58% 38% 47%
EBITDA Margin 13.6% 12.6% 28.6% 35% 12% 45% 57% 22% 27% 14% 15%
EBIT Margin 5.8% 6.2% 5.9% 12% 4% 18% 16% 9% 14% 7% -5%
OCF Margin 9.6% 8.7% 27.3% 26% 12% 34% 50% 13% 22% 11% 13%
FCF Margin 3.2% 4.7% 14.5% 6% 5% 14% 11% -11% -4% 3% 7%

COMPARABLE FIRMS FINANCIALS
TARGET FIRM XXI XXII XXIII XXIIV XXV XXVI XXVII XXVIII XXIX XXX
RDSA LN SIBN RU YPFD AR HSE CN MPC US OMV AV GALP PL PSX US RIL IN PTT TB MOL HB
Royal Dutch Shell Gazprom Neft Husky Energy Marathon Galp Energia Reliance MOL
YPF SA OMV AG Phillips 66 PTT PCL
Plc PJSC Inc Petroleum SGPS SA Industries Ltd Hungarian Oil
Currency USD USD USD USD USD EUR EUR USD USD USD USD
LTM Rev $ 371,573 $ 38,552 $ 16,398 $ 17,274 $ 83,288 $ 21,196 € 16,666 $ 108,994 $ 73,481 $ 69,614 $ 18,495
LTM Date 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018 9/30/2018
2 Year Revenue $ 395,594 $ 40,180 $ 15,182 $ 17,017 $ 122,599 $ 26,881 € 19,382 $ 110,405 $ 89,474 $ 73,321 $ 18,018
2 Year Date 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 12/31/2019 3/31/2020 12/31/2019 12/31/2019
LTM Gross Profit $ 65,029 $ 8,674 $ 2,646 $ 2,166 $ 6,501 $ 6,195 € 3,169 $ 10,220 $ 24,503 $ 10,703 $ 5,179
LTM EBITDA $ 50,491 $ 10,015 $ 5,186 $ 4,024 $ 6,746 $ 5,638 € 2,576 $ 5,107 $ 11,699 $ 11,683 $ 2,879
LTM EBIT $ 21,408 $ 6,042 $ 1,339 $ 1,481 $ 2,332 $ 2,091 € 1,049 $ 4,009 $ 5,687 $ 4,327 $ 1,202
LTM OCF $ 35,565 $ 8,367 $ 3,638 $ 3,323 $ 6,177 $ 4,021 € 1,538 $ 5,365 $ 9,021 $ 8,146 $ 2,037
LFY Disp $ 32,824 $ 7,388 $ 3,335 $ 2,856 $ 6,609 $ 3,448 € 1,432 $ 3,648 $ 8,705 $ 8,634 $ 2,000
LFY Acq $ (20,845) $ (6,123) $ (3,612) $ (1,711) $ (2,732) $ (1,586) € (791) $ (1,832) $ (11,471) $ (3,314) $ (1,043)
LFY FCF $ 11,979 $ 1,265 $ (277) $ 1,144 $ 3,877 $ 1,862 € 641 $ 1,816 $ (2,766) $ 5,319 $ 957
Rev Forecast Mo. 15 15 15 15 15 15 15 15 18 15 15
Rev Forecast Yrs. 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.50 1.25 1.25
TARGET XV XV XV XV XV XV XV XV XV XV
Marathon MOL
Royal Dutch Shell Gazprom Neft Husky Energy Galp Energia Reliance
YPF SA Petroleum OMV AG Phillips 66 PTT PCL Hungarian Oil
Plc PJSC Inc SGPS SA Industries Ltd
Corp & Gas PLC
Value Drivers RDSA LN SIBN RU YPFD AR HSE CN MPC US OMV AV GALP PL PSX US RIL IN PTT TB MOL HB
Exp. Rev. Growth 5.1% 3.4% -6.0% -1.2% 36.2% 20.9% 12.8% 1.0% 14.0% 4.2% -2.1%
Gross Profit Margin 17.5% 23% 16% 13% 8% 29% 19% 9% 33% 15% 28%
EBITDA Margin 13.6% 26% 32% 23% 8% 27% 15% 5% 16% 17% 16%
EBIT Margin 5.8% 16% 8% 9% 3% 10% 6% 4% 8% 6% 6%
OCF Margin 9.6% 22% 22% 19% 7% 19% 9% 5% 12% 12% 11%
FCF Margin 3.2% 3% -2% 7% 5% 9% 4% 2% -4% 8% 5%

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Royal Dutch Shell Plc

Firm Valuation Equity Snapshot

December 3, 2018 Primary

Location London New York City

RECOMMENDATION: BUY Exchange

Royal Dutch Shell has wisely positioned itself to

Analyst: Kevin Heymann, ASK Research 1 of 35

Analyst: Kevin Heymann, ASK Research 2 of 35

I. RECENT COMPANY NEWS ------------------------------------------------------------------------------------------ 4

Analyst: Kevin Heymann, ASK Research 3 of 35

Analyst: Kevin Heymann, ASK Research 4 of 35

Analyst: Kevin Heymann, ASK Research 5 of 35

International & Tariffs

Analyst: Kevin Heymann, ASK Research 6 of 35

OIL, GAS, & DIVERSIFIED ENERGY INDUSTRY

THREAT OF NEW ENTRY

VERDICT: LOW THREAT

SUPPLIER POWER BUYER POWER

VERDICT: LOW THREAT

INDUSTRY VERDICT: LOW THREAT

Analyst: Kevin Heymann, ASK Research 7 of 35

It is imperative for Royal Dutch Shell to solidify upstream operations.

Analyst: Kevin Heymann, ASK Research 8 of 35

Depreciation vs. Capital Expenditures

Operating and Capital Leases

Goodwill and Balance Sheet Intangibles

Analyst: Kevin Heymann, ASK Research 9 of 35

Unfunded Pension Liabilities

Analyst: Kevin Heymann, ASK Research 10 of 35

BP PLC (BP/ LN) - By Measure BP

Exxon Mobil Corp (XOM US) - By Measure ExxonMobil

Analyst: Kevin Heymann, ASK Research 11 of 35

BP PLC (BP/ LN) - By Geography

Exxon Mobil Corp (XOM US) - By Geography

Royal Dutch Shell BP ExxonMobil

Analyst: Kevin Heymann, ASK Research 12 of 35

Royal Dutch Shell 70000 3567 107 81 95 2500 288700 201000

Analyst: Kevin Heymann, ASK Research 13 of 35

Idiosyncratic Risk Factors

Additional idiosyncratic risk factors faced by Royal Dutch Shell can be

Analyst: Kevin Heymann, ASK Research 14 of 35

The Company also continues to be an innovation leader in

Analyst: Kevin Heymann, ASK Research 15 of 35

A collection of fascinating New Energies projects and joint ventures include:

The development of liquefied natural gas, helped by small-size re-

Additionally, the exponential rise of the Internet of Things industry will

Technologies that promise to increase the efficiency of commercial,

Earnings Drivers & Key Performance Indicators

Of the 27 analysts covering the Company, 17 convey BUY ratings, 9 deliver

Price (as of 11/30/2018) $60.40 $40.35 $79.50

Analyst: Kevin Heymann, ASK Research 19 of 35

Analyst: Kevin Heymann, ASK Research 20 of 35

Analyst: Kevin Heymann, ASK Research 21 of 35

Analyst: Kevin Heymann, ASK Research

Low (52 Week)

P/E Expected Value

P/FCF Expected Value

Average of Comparables Valuation

EV/EBITDA Median Expected Value

EV/EBITDA vs. Gross Profit Regression

Husky Energy Inc

Cenovus Energy Inc

MOL Hungarian Oil