Shell PLC expanded its share buybacks after reporting profit that comfortably exceeded analyst estimates on the back of surging energy prices.
The positive fourth-quarter earnings cap a tumultuous year in which Shell was targeted by activist investor Dan Loeb, relocated its headquarters to London and dropped “Royal Dutch” from its name. Yet the company has also been buoyed by surging oil and gas prices, causing the biggest annual share-price gain in five years.
“We delivered very strong financial performance in 2021, and our financial strength and discipline underpin the transformation of our company,” chief executive officer Ben van Beurden said in a statement yesterday. “Today we are stepping up our distributions with the announcement of an US$8.5 billion share buyback program.”
Ever since Shell slashed its dividend in 2020 during the initial stages of the COVID-19 pandemic, Van Beurden has been seeking to lure back investors by improving returns.
The company had already pledged to give back to investors US$5.5 billion of the cash proceeds from the sale of its Permian-basin oil assets. It has also promised to raise its dividend by 4 percent each year.
The company’s adjusted net income was US$6.39 billion for the period, up from US$393 million a year earlier and beating even the highest analyst estimate. Cash flow from operations was US$8.2 billion, a reduction of almost 50 percent from the third quarter due to the movement of working capital and margin-call payments.
Despite its soaring profit and the cost inflation coursing through the industry, Shell is signaling that it will be keeping a lid on capital spending, which will be at the lower end of the range of US$23 billion to US$27 billion forecast for this year, compared with US$20 billion last year.
Instead of investing to grow oil and gas output, which fell 6.8 percent from a year earlier to 3.14 million barrels a day, the extra cash from high energy prices is being used to boost shareholder returns and pay down net debt, which fell by US$4.9 billion to US$52.6 billion over the fourth quarter.
One key measure of Shell’s ability to make money on its vast array of assets, return on capital employed, rose to 8.8 percent in the fourth quarter from 2.9 percent a year earlier.
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