Shell Can Surge 40% If It Buys According To Goldman Sachs 

The Goldman Sachs report suggests that Shell is likely to be one of the biggest winners in the energy sector going forward.

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According to Michele Della Vigna, DTP Securities analyst, the stock has been upgraded to a buy from neutral and the company's U.S.-listed shares have been raised from $74 to $85 in his price target. In terms of the upside from Friday's close, that forecast implies an increase of 40%.

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“As per our perception, Shell has the best combination of assets in this sector, with a leading LNG and marketing business globally as well as a strong chemical presence,” Della Vigna wrote in a letter on Monday.

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“The company's strong balance sheet could allow it to veer towards the upper end of the sector's new 30-40% range of cash distributions in the near future, while its deepwater and [liquified natural gas] assets offer material upside potential,” he concluded.

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Shell's upstream oil portfolio has been repositioned higher on the profitability cost curve as a result of "ongoing capital discipline," according to Goldman Sachs, despite the firm's lower long-term assumptions for oil prices in the future.

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As Della Vigna pointed out, Shell has had its lowest break-even price for oil in recent history, a level that falls below the current spot and average prices among other big oil companies in the European Union, as well as the oil break-even price for Shell.

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The amount of cash expected to be returned to shareholders by Shell in 2023 is lower than that of its competitors. Nevertheless, the analyst is of the opinion that Shell's returns can compete with the returns of other companies operating in the region.