Shell to up dividend as it commits to oil production

(Sharecast News) - Shell is to increase dividend payouts, reduce spending and maintain oil production, the energy giant confirmed on Wednesday as it looks to bolster shareholder support. In a statement issued ahead of an investor day in New York, the blue chip said the focus would be on "performance, discipline and simplification".

Shareholder distributions will be increased to 30% to 40% of cash from operations, up from a previous target of 20% to 30%. That will start with a 15% increase in dividend per share in the second quarter of the current year, followed by share buybacks of "at least" $5bn in the second half.

Capital spending, meanwhile, will be reduced to $22bn to $25bn per year for 2024 and 25 - down from previous plans for $23bn to $27bn - with annual operating costs structurally reduced by between $2bn and $3bn by the end of 2025.

Shell also committed to oil production until the end of the current decade, although it insisted plans to become a net zero emissions energy business by 2050 remained on track.

Chief executive Wael Sawan, who took over the top job in January, said: "We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future.

"Performance, disciple and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition."

Russ Mould, investment director at AJ Bell, said: "The new boss has signalled a shift in the company's strategic priorities, [with] plans to keep pumping oil at current levels out to 2030. This will underpin the higher dividend, with a notable increase in the proportion of cash flow which will be returned to shareholders.

"The move by Sawan will likely be welcomed by shareholders, as it puts Shell more in line with US peers. He is signalling that renewables and clean energy projects are all well and good but they must pay their own way, and if the returns projected are too weak, they won't make the cut."

Victoria Scholar, head of investment at Interactive Investor, said: "Sawan [is] attempting to win support from investors by upping [the] dividend and buybacks, and committing to oil production.

"Sawan has scrapped plans to cut oil production by 1% to 2% per year, following BP which earlier this year scaled back its greenhouse gas emissions targets. Shell's rationale is that it has already reached its 2030 oil reduction target, but no doubt this will further infuriate climate change protestors."

As at 1015 BST, Shell's London-listed shares were largely flat at 2,307.5p.