Shell, one of the largest oil companies in Europe, announced plans to increase the amount of earnings dedicated to dividends and buybacks for its shareholders. This move comes as the company aims to align its market valuation with competitors like Exxon and Chevron.
Distribution Increase and Capital Expenditures
During Shell’s Capital Markets Day presentation, the company revealed its intention to raise distributions to 30% to 40% of cash flow, up from the current rate of 20% to 30%. Additionally, Shell plans to decrease capital expenditures slightly while maintaining a steady production of oil and gas.
CEO Wael Sawan’s strategy includes a focus on the core production of fossil fuels, which has led to adjustments in green energy targets for the future.
Market Response
Following the announcement, Shell’s American depositary receipts saw a 1.3% increase in premarket trading, while London shares rose by 0.5%.
The company aims to repurchase at least $5 billion worth of shares in the second half of 2023 and plans to boost dividends by 15% starting from the second quarter.
Shift in Strategy
Previously, Shell had set goals to decrease annual production of liquid fuels like crude oil. However, the company disclosed that it will no longer pursue annual reductions in liquids output.
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