Shell increases dividend, stabilizes oil production in new CEO plan

Shell will increase its dividend and buy back shares keeping oil production steady through 2030, the company said on Wednesday, as CEO Wael Sawan moves to restore investor confidence that has faltered with the announcement of a transition plan energy.

In a new finance structure announced ahead of an investor conference in New York, Shell said it would increase overall shareholder allocation from 30% to 40% of cash flow from operations, up from 20% to 30% previously.

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

The capital structure is the cornerstone of Sawan’s effort to boost Shell stock’s performance relative to its U.S. peers after many investors walked away from the British company even after it posted a record $40 billion in profit last year.

The group has faced concerns that it is withdrawing from its oil and gas businesses at a time of rising energy prices, while returns from its growing renewable energy and low-carbon business remain weak.

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

“We will invest in the models that work, those with the highest returns that play to our strengths.”

STABILIZED PRODUCTION

Shell canceled its previously announced goal to cut oil production by 20% by 2030 after largely meeting its target.

The company has now said it will keep its oil production steady through 2030 and strengthen its natural gas business to defend its position as the world’s largest player in liquefied natural gas (LNG).

Capital spending will be reduced to a range of $22 billion to $25 billion annually in 2024 and 2025, from a planned $23 billion to $27 billion in 2023. Shell’s move follows a similar move by rival BP made it earlier this year when CEO Bernard Looney backed out of plans to cut its oil and gas output by 40% by 2030.

Sawan, a 48-year-old Lebanese-Canadian who previously headed Shell’s oil, gas and renewable energy divisions, has scrapped several projects in recent months, including offshore wind, hydrogen and biofuels, due to weak return projections .

Source: Terra

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