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Shell, the world's second-largest listed oil and gas company,
saw its shares close more than 4% lower on Thursday, wiping out
$10 billion of its market value. It had earlier reported
stronger-than-expected third-quarter profits which were,
however, overshadowed by Chief Executive Ben van Beurden's
warning about shareholder returns.
"The prevailing weak macroeconomic conditions and challenging
outlook inevitably create uncertainty about the pace of reducing
gearing to 25% and completing the share buyback program within
the 2020 timeframe," van Beurden said.
In a call with analysts on Thursday, van Beurden sought to play
down the warning, saying Shell still intended to complete the
buyback on schedule by the end of 2020.
That did little to ease investor concerns.
"The planned $25 billion share buyback before end-2020 was
acknowledged by the CEO as a 'statement of the obvious.' We
agree but it had a predictable and in our view unnecessary
impact," UBS analyst Jon Rigby said in a note.
The comments, Rigby said, "are likely to exasperate
long-suffering investors further". Rigby retains a 'buy'
recommendation for Shell.
Shell, the most profitable oil major in 2018 ahead of larger
rival ExxonMobil <XOM.N>, has in recent years been many
investors' top pick among the group after the Anglo-Dutch firm
cut costs and ramped up commitments for shareholder returns.
Shell plans to boost payouts to investors through dividends and
share buybacks to $125 billion between 2021 and 2025.
Bernstein analyst Oswald Clint said van Beurden was being
over-cautious.
"We've no doubt reiterating our buy on Shell is like talking to
the wall today and it's a blow for one of our 2019 top picks,"
Clint said in a note.
BP on Tuesday also indicated that its expected dividend boost
was now likely to happen next year and not by the end of 2019.
After a decade of weakness, concerns over the ability of the
world's top oil companies to boost shareholder returns compound
worries about the sector as investors shun independent oil and
gas producers, particularly U.S. shale firms.
Morgan Stanley analyst Martijn Rats said he now assumed the
buyback program would be completed a year later than planned.
Given the economic environment and expected decline in cash
generation, Shell will be able to cover its $15 billion dividend
commitment from its operations, leaving little room for buybacks
and debt reduction, Rats said.
Jefferies analyst Jason Gammel said Shell's "management
credibility has now been strained". Gammel retained his "buy"
recommendation on Shell, "with somewhat less enthusiasm".
Shell shares were up 0.6% at 1004 GMT.
U.S. rivals Exxon and Chevron <CVX.N> report third-quarter
results on Friday.
(Reporting by Ron Bousso; Editing by Dale Hudson)
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