Shell boosts dividend, steadies oil output in new CEO plan
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[June 14, 2023] By
Ron Bousso and Shadia Nasralla
LONDON (Reuters) - Shell will ramp up its dividend and share buybacks
while keeping oil output steady into 2030, it said on Wednesday, as CEO
Wael Sawan moved to regain investor confidence that wavered over its
energy transition plan.
In a new financial framework announced ahead of an investor conference
in New York starting at 1230 GMT, Shell said it will increase overall
shareholder distribution to 30% to 40% of cash flow from operations from
20% to 30% previously.
That includes a 15% dividend boost and an increase in the rate of its
share buyback programme from the second quarter to $5 billion from $4
billion in recent quarters.
The financial framework is the linchpin of Sawan's effort to boost
Shell's share performance relative to its U.S. peers after many
investors shunned the British company even after it posted a record $40
billion profit last year.
The group has faced concerns that it was shifting away from oil and gas
at a time of booming energy prices while returns from its growing
renewables and low-carbon businesses remained poor.
Shell shares were up 0.35% at 0750 GMT.
"Performance, discipline, and simplification will be our guiding
principles," Sawan, who took office in January, said in a statement.
"We will invest in the models that work – those with the highest returns
that play to our strengths."
The dividend increase, to around 33 cents per share, is the sixth since
Shell slashed its then 47 cent dividend by nearly two-thirds in April
2020, the first cut since the Second World War, in the wake of the
COVID-19 pandemic.
The higher payout ratio will make keep Shell "competitive with peers",
RBC analyst Biraj Borkhataria said in a note.
OIL STEADY
Shell scrapped its previous target to cut oil output by 20% by 2030
after largely reaching the goal. It produced around 1.5 million barrels
per day of oil in the first quarter of 2023.
It said it will now keep its oil production steady to 2030 and will grow
its natural gas business to defend its position as the world's biggest
liquefied natural gas (LNG) player.
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The logo of Royal Dutch Shell is
pictured during a launch event for a hydrogen electrolysis plant at
Shell's Rhineland refinery in Wesseling near Cologne, Germany, July
2, 2021. REUTERS/Thilo Schmuelgen/File Photo
Capital spending will be reduced to a $22 billion to $25 billion per
year range for 2024 and 2025 from a planned $23 billion to $27
billion in 2023. Shell's shift follows a similar move rival BP made
earlier this year when CEO Bernard Looney rowed back from plans to
cut its oil and gas output by 40% by 2030.
Sawan, a 48-year-old Canadian-Lebanese national who previously
headed Shell's oil, gas and renewables divisions, has in recent
months scrapped several projects, including in offshore wind,
hydrogen and biofuels, due to projections of weak returns.
On Wednesday it said it is also conducting a strategic review of
energy and chemicals assets on Bukom and Jurong Island in Singapore.
NET ZERO Speculation that Sawan was set to slow Shell's plans to
reduce greenhouse gas emission and shift to renewables have angered
climate-focused investors.
Ramping up fossil fuel production would likely lead to a rise in
Shell's absolute greenhouse gas emissions, even though it said it
remains committed to slashing emissions to net zero by 2050.
Shell's climate pledges are based on emissions intensity reductions
per unit of energy produced, which means absolute emissions can rise
even if the headline intensity metric falls.
It currently has a target to cut its 2030 emissions intensity,
including from the combustion of the fuels it sells, by 20%.
Scientists say the world needs to cut greenhouse gas emissions by
around 43% by 2030 from 2019 levels to stand any chance of realising
the 2015 Paris Agreement.
Shell also faces a Dutch court ruling ordering the company to
drastically cut emissions. It has appealed the decision.
(Reporting by Ron Bousso and Shadia Nasralla; Editing by David
Goodman and Jan Harvey)
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