Shell (SHEL) is under immense pressure following its decision to purchase 100,000 metric tons of heavily-discounted Russian oil. According to CNBC, the oil company plans to donate all the profits from the controversial oil purchase to help support humanitarian aid in Ukraine. SHEL shares fell 3.82% to close at $49.39 on March 4.
Royal Dutch Shell is a Netherlands-based company that explores and extracts oil, natural gas, and natural gas liquids.
The purchase comes at a time when many firms are shunning Russian oil following Russia’s invasion of Ukraine. While the purchase did not violate Western sanctions, Shell has come under criticism from Ukraine’s Foreign Minister Dmytro Kuleba for not cutting all ties with Russia.
In its defense, Shell insists it is in talks with governments and remains focused on ensuring the security of the oil supply. The company has also confirmed plans to exit all joint ventures with state-linked Gazprom and its related entities.
Shell has also confirmed it will continue to choose alternatives to Russian oil. However, it has warned that such a switch cannot occur overnight, given Russia’s significance to the global oil supply.
BP (BP) is another oil major that has severed its ties with Russia. The British oil major has confirmed it will offload its 19.75% stake in Russian-controlled Rosneft.
Last month, Cowen & Co. analyst Jason Gabelman reiterated a Buy rating on Shell and raised the price target to $58 from $53, implying 17.43% upside potential to current levels. According to the analyst, a push to upgrade the company’s cash return framework could be supportive to shares going forward.
Consensus among analysts is a Moderate Buy based on 4 Buys and 2 Holds. The average Shell price target of $51.33 implies 3.93% upside potential to current levels.
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