Shell to boost shareholder returns after oil price rise

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FILE PHOTO: The Royal Dutch Shell logo is seen at a Shell petrol station in London
The Royal Dutch Shell logo is seen at a Shell petrol station in London, January 31, 2008. REUTERS/Toby Melville/File Photo
  • Shell to boost returns to 20%-30% of free cashflow
  • Company to "retire" $65 bln net debt target
  • Spending to stay below $22 billion in 2021 as planned
  • Second quarter LNG trading "significantly" below average

LONDON, July 7 (Reuters) - Royal Dutch Shell (RDSa.L) will boost returns to shareholders via share buybacks or dividends earlier than expected after a sharp rise in oil and gas prices helped it reduce debt, the Anglo-Dutch energy firm said on Wednesday.

Shell will increase its distribution to shareholders to 20% to 30% of cash flow from operations beginning in the second quarter, the company said in a trading statement before quarterly results.

The move, which comes earlier than many analysts had expected, was due to "strong operational and financial delivery, combined with an improved macroeconomic outlook."

Shell's London-traded shares were up 2.2% by 0758 GMT, compared with a 1.2% gain for the broader European energy index (.SXEP).

Shell previously said it would boost returns once its net debt dropped below $65 billion. The company said on Wednesday it would "retire" the target without specifying whether it had hit it.

"In the second quarter, Shell expects to have further reduced its net debt, although the extent of the reduction will be moderated by working capital movements," it said.

Analysts had largely expected Shell to increase distribution towards the end of the year, but a strong rise in oil and natural gas prices in recent months accelerated the timetable.

The shareholder returns increase "is an important milestone that highlights the strength of Shell's free cashflow proposition and sends an important message to the market," JP Morgan analyst Christyan Malek said in a note.

In the first quarter, the company raised its dividend after profits rose to $3.23 billion. read more

Shell, which is in the midst of a strategic shift to lower its greenhouse gas emissions, said it would stick to its spending plans that would remain below $22 billion in 2021.

Despite the higher oil and gas prices, Shell said its liquefied natural gas (LNG) trading operations, the world's largest, were "significantly below average" in the second quarter and similar to the previous quarter.

Oil products sales are expected to be between 4 million to 5 million barrels per day, still well below pre-pandemic levels.

Reporting by Ron Bousso; Editing by Edmund Blair and Jason Neely

Our Standards: The Thomson Reuters Trust Principles.

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Ron has covered since 2014 the world’s top oil and gas companies, focusing on their efforts to shift into renewables and low carbon energy and the sector's turmoil during the COVID-19 pandemic and following Russia's invasion of Ukraine. He has been named Reporter of the Year in 2014 and 2021 by Reuters. Before Reuters, Ron reported on equity markets in New York in the aftermath of the 2008 financial crisis after covering conflict and diplomacy in the Middle East for AFP out of Israel.

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