Royal Dutch Shell PLC updates
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Royal Dutch Shell has raised its dividend almost 40 per cent and plans to start a $2bn share buyback scheme to be completed by the end of this year, as the energy major takes advantage of stronger energy prices to return cash to investors.
The move, which came as the group reported a jump in quarterly earnings after oil recovered to above $70 a barrel in the second quarter, was more aggressive than analysts had anticipated. The company had said in April the dividend would likely remain unchanged for the rest of 2021 after raising it slightly at its previous earning report.
“Shell’s stepping up distributions is extremely positive,” said Biraj Borkhataria at RBC Capital Markets.
The dividend will rise to 24 cents a share, from 17.35 cents a share, from the second quarter, the company said on Thursday. Shell cut its dividend a year ago by two-thirds to 16 cents, the first reduction since the second world war, as the coronavirus pandemic slashed demand and hammered energy prices. Oil and gas, however, have rebounded this year.
The share buybacks were more widely anticipated, with investors keen to see energy companies returning cash rather than raising investment. Many had predicted, however, that the buyback would be closer to $1.5bn. Shell said it would keep holding capital expenditure below $22bn for the year.
The policy of increasing dividends 4 per cent annually “remains unchanged”, said chief executive Ben van Beurden.
In the second quarter, Shell reported adjusted net profit of $5.5bn, slightly ahead of analyst expectations of $5bn and up from $3.2bn in the first quarter.
Cash flow from operations, excluding working capital movements, hit $14.2bn in the second quarter, exceeding analyst expectations for $12.1bn.
Net debt fell to $65.7bn from $71.3bn in the previous quarter, largely reaching its target of reducing net debt to $65bn before increasing shareholder distributions.
The company said it was “retiring” the $65bn “milestone” and would instead target “AA credit metrics through the cycle”.
Shell’s results have been buoyed by rising oil and gas prices, with Brent, the international crude benchmark, trading near $75 a barrel this month compared with $45 a barrel at the start of the year, while gas prices have risen globally due to tight supplies.
The recovery in energy prices is particularly marked compared with the second quarter of last year, when pandemic-induced lockdowns were hammering demand and driving oil prices to below $20 a barrel.