Wikimedia/Coolcaesar.
(qlmbusinessnews.com via telegraph.co.uk – – Thur, 26th July 2018) London, Uk – –
Royal Dutch Shell has triggered the start of a long-awaited £19bn ($25bn) share buyback scheme that will reward patient investors over the next two years.
The oil major will kick off the payday by distributing $2bn over the next three months for those shareholders who accepted shares rather than dividends during a downturn in the oil price two years ago.
As the crude market has recovered, Shell has prioritised paying down debt and selling off $30bn in assets over repurchasing the dividend scrips.
But boss Ben Van Beurden 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.
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.
Both the profit and debt reduction figures fell slightly short of expectations, but Shell will still press ahead with its plan for buybacks after better-than-expected sales of its non-core assets.
Shell has so far completed $27bn of asset sales, including large swathes of the North Sea, and has more than $7bn worth of deals that it has announced or that are in advanced stages.
“This move complements the progress we have made since the completion of the BG acquisition in 2016, to reshape our portfolio through a $30bn divestment programme and new projects, to reduce net debt, and turn off the scrip dividend,” Mr Van Beurden said.
The announcement is expected to be warmly welcomed by investors after a disappointing February update in which Shell dashed hopes for the start of buybacks.
At the time, Jessica Uhl, chief financial officer, said the company would first need “line of sight” that its debt gearing could ease to 20pc.
Ahead of the financial results analysts predicted that the group would begin buybacks despite remaining stubbornly above this level in order to fulfil its pledge that it would complete the buyback programme by 2025.
“Timing is getting fairly limited,” warned Gordon Gray, of HSBC, last week.
By Jillian Ambrose
