London Evening Standard: Merrill sees opportunity in link-up of Shell's two arms: “Longer-term, Merrill is worried by management's direction and lack of strategic vision. "Merger and acquisition activity may also feature at some stage in an attempt to address a flat production profile at the end the decade and a lower reserve life than its peers," says Merrill’s Mark lannotti.” (ShellNews.net) Posted 20 April 05

Market Report

BY MICKEY CLARK

(EXTRACT FROM ARTICLE)

PART of oil giant Shell's penance for its reserves debacle last year is to merge the two holding companies that form the main plank of its management structure into a single entity.

The get-together between Royal Dutch/Shell and UK arm Shell Transport & Trading, pencilled in for July, is seen as long overdue in the City and could provide investors with rich rewards in the run-up to the event. That is according to broker Merrill Lynch, which has upgraded the shares from neutral to buy, hoping to take advantage of the "strong technical support" for the shares that is anticipated between now and then.

But Merrill says there are other long-term fundamentals underpinning Shell that should make it attractive to shareholders. The price could also be boosted by positive news on the disposal of assets and a possible share buyback of between $2 billion (£1.05 billion) and $4 billion in the second half of the year. Shell's strong position in the refining markets, which has been under immense pressure in the US, is also seen as positive.

Longer-term, Merrill is worried by management's direction and lack of strategic vision. "Merger and acquisition activity may also feature at some stage in an attempt to address a flat production profile at the end the decade and a lower reserve life than its peers," says Merrill’s Mark lannotti.

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