Shell PLC plans to increase its dividend 15 percent and boost natural gas production as new CEO Wael Sawan refocuses on the fossil fuels that drove record profits last year.
It is part of a pivot by the European oil major to expand the most profitable parts of its business, even if they are carbon intensive, while scaling back ventures that do not make high enough returns.
The company reiterated its pledge to achieve net zero emissions by 2050.
Photo: Reuters
“We will invest in the models that work — those with the highest returns that play to our strengths,” Sawan said in a statement.
The management team was scheduled to lay out more details of the plan to shareholders at a presentation in New York yesterday.
The company has been gradually building back its dividend since former Shell CEO Ben van Beurden cut it during the depths of the COVID-19 pandemic. While the latest increase would still leave the payout about 30 percent below pre-pandemic levels, the move might help convince investors that the company can be a reliable source of cash, like its more highly valued US peers.
As well as the dividend increase, which would take effect this quarter, Shell committed to buying back at least US$5 billion of shares in the second half of this year. The company would reduce capital spending to US$22 billion to US$25 billion a year for next year and 2025, down from an expectation of US$23 billion to US$27 billion this year.
Key to achieving higher returns would be the oil and gas business that drives the majority of Shell’s profits. The company would no longer seek to cut oil production by 1 to 2 percent annually, having achieved its initial output-reduction plan — announced in 2021 amid a focus on cutting carbon emissions — faster than anticipated.
Shell aims to grow its integrated gas business and is to stabilize oil output to 2030. That follows in the footsteps of BP PLC, which also rolled back its plans to cut oil production earlier this year.
The initial outline of Shell’s plan puts oil and gas front and center while giving lower-return, low-carbon efforts a smaller supporting role. That is in stark contrast from the company’s strategy update about two years ago, when Shell said its oil production was in decline and named electricity and low-carbon hydrogen as its key sources of growth.
Shell said it is to invest “selectively” in power, focusing on markets where it can add value with its traders.
Investments in hydrogen and carbon capture technology would be made “in a disciplined manner to create options for the future,” it said.
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