Shell begins share buyback but profits fall short

ROYAL Dutch Shell has triggered the start of a longawaited $25bn (£19bn) share buyback scheme over the next two years even after falling short of its profit target in the last quarter.

The oil major bowed to the rising pressure to reward its patient investors by promising to buy back $2bn worth of shares over the next three months after relying on scrip dividends during the oil market rout.

As the crude market has recovered, Shell has prioritised paying down debt and selling off $30bn in assets over repurchasing the shares, leaving investors frustrated as rising profits failed to translate into shareholder rewards.

Shell’s profits for the last quarter bounced almost a third higher than the same period last year to $4.7bn, while its debt has fallen to 23.6pc of its earnings, down from 25.8pc a year ago. The company, which stopped offering scrip dividends at the end of last year, is paying a cash dividend of 47c a share.

Ben van Beurden, Shell’s chief executive, said the company’s progress in strengthening its balance sheet had given it confidence in taking this “important step” in maintaining Shell’s investment case. Despite the multibillion-dollar buybacks, the equity market turned its back on Shell, sending its shares down 3.6pc to £26.27 after the 30pc profit surge failed to meet market expectations.

Jessica Uhl, chief financial officer, said the financial results none the less reflected “very strong operational performance” through which the company has increased cash flow, cut debt and delivered sales deals.