Shell increases dividend and stabilizes oil production in new managing director

LONDON, June 14 (Reuters) – Shell ( SHEL.L ) will increase dividends and share buybacks while keeping oil production flat into 2030, it said on Wednesday, as Chief Executive Wael Sawan moved to restore investor confidence that has faltered over the energy transition. plan.

In a new economic framework announced ahead of an investor conference in New York starting at At 1230 GMT, Shell said it will increase its total shareholder distribution to 30% to 40% of cash flow from operations from 20% to 30% previously.

That includes a 15% dividend increase and an increase in the rate of its share buyback program from the second quarter to $5 billion from $4 billion in recent quarters.

The financial framework is the linchpin of Sawan’s efforts to boost Shell’s share performance relative to its US peers after many investors rejected the British company even after it posted record profits of $40 billion last year.

The group has faced concerns that it was moving away from oil and gas at a time of high energy prices, while returns from its growing renewable and low-carbon businesses remained poor.

Shell shares were up 1.5% by 1204 GMT, against a 1% gain for an index of European oil and gas companies (.SXEP).

“Performance, discipline and simplification will be our guiding principles,” Sawan, who took office in January, said in a statement.

“We want to invest in the models that work – the ones with the highest returns that play to our strengths.”

The dividend increase, to around 33 cents a share, is the sixth since Shell slashed its then 47 cent dividend by nearly two-thirds in April 2020, the first cut since World War II, in the wake of the COVID-19 pandemic.

The higher payout ratio will make Shell “competitive with peers,” RBC analyst Biraj Borkhataria said in a note.

OIL CONSTANTLY

Shell shelved its previous target of cutting oil production by 20% by 2030 after largely meeting the target. It produced around 1.5 million barrels of oil per day in the first quarter of 2023.

It said it will now keep its oil production stable until 2030 and will grow its natural gas business to defend its position as the world’s largest liquefied natural gas (LNG) player.

Capital spending will be reduced to a range of $22 billion to $25 billion per year for 2024 and 2025 from a planned $23 billion to $27 billion in 2023.

Shell’s shift follows a similar move by rival BP ( BP.L ) earlier this year when Chief Executive Bernard Looney backed away from plans to cut oil and gas production 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 projected weak returns.

On Wednesday, it said it is also conducting a strategic review of energy and chemicals at Bukom and Jurong Island in Singapore.

NET ZERO

Speculation that Sawan would slow down Shell’s plans to reduce greenhouse gas emissions and switch to renewable energy has angered climate-focused investors.

Increasing fossil fuel production is likely to lead to an increase in Shell’s absolute greenhouse gas emissions, although it said it remains committed to cutting emissions to net zero by 2050.

Shell’s climate pledges are based on emission intensity reductions per unit of energy produced, which means that absolute emissions may rise even if the headline intensity target falls.

It currently has a target to cut emissions intensity by 2030, including from burning the fuel it sells, by 20%.

Scientists say the world needs to cut greenhouse gas emissions by around 43% by 2030 from 2019 levels to have any chance of realizing the 2015 Paris Agreement.

Shell is also facing a Dutch court ruling that orders the company to drastically reduce emissions. It has appealed the decision.

Reporting by Ron Bousso and Shadia Nasralla Editing by David Goodman and Jan Harvey

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