Shell will fuel pension boost
ROYAL Dutch Shell has cheered pension funds and other investors by bringing forward plans to hand back billions.
The global energy giant has announced the measure as the rising oil price boosts its fortunes.
It plans to start returning 20 to 30 per cent of its cash flow from operations to investors in dividend payments and share buybacks after its half-year results later this month, having cut its debts to £45billion.
Shell was originally due to start the increased payouts to shareholders at the end of the year.
Analysts believe that share buybacks alone could be worth more than £1.5billion a year to its investors.
Shell said the move was due to “strong operational and financial delivery, combined with an improved macro-economic outlook”.
The oil giant suffered a brutal 2020, losing £15.7billion due to the economic disruption caused by the pandemic.
However, its fortunes have been revived by a combination of cuts, asset sales and the price of crude oil rocketing from a low of $21.44 per barrel in April last year to a high of $76 this month.
AJ Bell investment director Russ Mould said: “Today’s teaser from Royal Dutch Shell ahead of second-quarter results will be getting its investors as excited as James Bond fans are by the trailer for the latest film in the series.
“The company has unveiled plans to return more cash to shareholders in the second half as the recent surge in the oil price benefits cash flow and helps with debt reduction.”
Last month, Shell chief executive Ben van Beurden said that it will have to take “bold action” to meet court-ordered emissions cuts.
Shell had planned to reduce its carbon emissions by 20 per cent by 2030.
However in May, a Dutch court sided with campaigners Friends of the Earth and ruled that it should increase that target to 45 per cent.
Mr Mould said that the financial cost of meeting the increased carbon reduction target could limit its ability to boost its dividend.
He said: “This is likely to require significant investment and for this reason Shell is likely to be wary of overstretching itself in terms of dividend commitments.”