EFTA01385528.pdf

> Energy, Materials & Industrials Deutsche Bank ED Royal Dutch Shell — Lucas Herrmann, BUY, close 2561p, 2700p tgt, 5% upside • Best-in-class absolute cash generation with $25-30bn FCF guided for Production outlook indicates substantial growth, driven by unconventional 2020. • This drives substantial shareholder return. Between the c6% dividend 1200 lara Lapa Prelude UK yield and c$25bn of buy-backs. Shell is set to return c$70bn to mat Gorgon -21,000 US GoM shareholders over the next three years. Moreover, the dilutive scrip Permian growth Utica growth dividend is gone, earlier than expected. ,2 Ye 800 Canada growth its Pre FID Base decline (VVM 2.1%) • Strong optionality and deep resource base. In addition to conventional • 600 sources, Shell has broad portfolio optionality. .0 400 - The BG acquisition is firmly embedded, giving Shell an unsurpassed O position in LNG 200 - We expect strong volume growth in US Permian shale (towards 0 250kboe/d by late 2020s, with breakeven at c$45/bbl) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Deutsche Bank • Shell downstream FCF alone in 2017E is enough to cover almost half the dividend, at c$7bn. • Decline rates to 2025 are lowest in the sector at c2%, in part from Cash flow growth driven by more than just refining Deepwater's growth potential — most particularly Brazil. FCF Marketing Chemicals magaimi DD&A • Further restructuring potential from divesting Shell's 'long tail' of largely 15000 Refining —OCF Capex mature territories in the upstream portfolio. This would simplify the business 013000 f,11000 and improve RIP ratios. u r° 9000 • Shell is attractively valued at a 5.7% 18E dividend yield versus the 2.8% E 7000 of its only true global peer, Exxon. 8 5000 - It trades on 14.4x 18E P/E, versus Exxon's 22.5x. Related DB Research: -0) 3000 • (I) • 1000 -1000 IIIIIiiii -3000 - Royal Dutch Shell: Clear direction and purpose (Herrmann) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 European Integrated Oils: 2018 Outlook cash laws set to open (Herrmann) Source- Deutsche Bank, Company data Deutsche bank Research. European Equity Focus - .iartseus. 2018 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086814 CONFIDENTIAL SDNY_GM_00232998 EFTA01385528