SHELL AUSTERITY DRIVE ENDS, TO PAY DIVIDENDS
Investors can opt to receive dividends in shares or cash in fourth quarter
LONDON
ROYAL Dutch Shell yesterday cancelled an austerity dividend policy as the oil and gas company boosted its cash generation forecasts, drawing a line under three years of oil price turmoil.
The Anglo-Dutch company said it will abolish its scrip dividend, through which investors can opt to receive dividends in shares or cash, in the fourth quarter of this year. The scrip dividend scheme was introduced in early 2015 after oil prices fell by more than half from over US$100 (RM412) a barrel.
With lower debt, oil prices above US$60 a barrel and progress in asset sales, pressure has mounted on Shell to deliver on commitments made in 2015 to remove the scrip and launch a share buyback programme.
“If this situation is prolonged for two to three months, it is possible airlines could reduce Bali flights in the upcoming northern summer schedule that starts from end March,” said Corrine Png, chief executive of transport research firm Crucial Perspective.
Australia’s Jetstar is allowing passengers to re-route to other holiday destinations like Phuket in Thailand, while Singapore Airlines
Shell’s dividend payouts in the 12 months to September amounted to US$15 billion, with scrip accounting for around a quarter.
In a strategy update, the company reiterated its plans to buy back US$25 billion of shares between this year and 2020 in order to offset the dilutive effect of the scrip and its US$54 billion acquisition of BG Group.
Shell also raised its cash flow outlook to US$30 billion from Ltd budget offshoot Scoot said it would transport stranded passengers by bus and ferry from Bali to the city of Surabaya on the neighbouring island of Java for flights back to Singapore.
Png said each day that the Bali airport was closed meant about US$5 million (RM20.6 million) in combined lost flight revenue for the 42 airlines that fly there. Reuters US$25 billion by 2020, assuming an oil price of US$60 a barrel.
Over the past two years Shell sharply increased revenue from its operations thanks to deep cost cuts, thousands of layoffs and asset sales.
Over the past five quarters, it has adapted its operations to make profit at oil prices of US$50 a barrel, generating sufficient cash to cover its dividend payouts.
“We have also made significant progress with our divestment programme, allowing us to reduce net debt in that time,” said chief executive officer Ben van Beurden in a statement.
BP pipped its rivals when announcing in October that it would resume share buybacks in the fourth quarter in order to offset the dilutive effect of the scrip dividend. Statoil also eliminated its scrip dividend. Reuters