Shell To Raise Dividend By 15% As It Doubles Down On Oil And Gas

By Tsvetana Paraskova of OilPrice.com

Shell plans to raise its dividend by 15%, effective from the second quarter 2023 interim dividend, as the UK-based oil and gas supermajor pledged on Wednesday to grow its gas business and extend its position in the upstream.

Back in 2021, Shell said that its oil production peaked in 2019 and is set for a continual decline over the next three decades as it looks toward the renewables side of the business.    

However, the post-Covid rebound in oil and gas demand and the Russian invasion of Ukraine with the subsequent major dislocation of energy trade has clearly shown “the fragility of the energy system when we starve it of the supply that is required,” CEO Wael Sawan told The Times earlier this year. Sawan said in March that Shell’s plan to have its oil production decline by up to 2% each year this decade was currently under review.

Today, at Shell’s Capital Markets Day 2023, Sawan said,

“We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future. Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.”

Shell’s focus will be to grow its Integrated Gas business and maintain leadership in the global liquefied natural gas (LNG) market, as well as “extend its advantaged position in Upstream to achieve cash flow longevity by stabilising liquids production to 2030.”

The company reiterated its commitment to climate targets, including net-zero emissions by 2050, but shifted its focus to capital and cost discipline which will underpin higher shareholder distributions of 30-40% of CFFO through the cycle, compared with 20-30% previously, through a combination of dividends and share buybacks.

Shell plans to launch share buybacks of at least $5 billion for the second half of 2023, subject to board approval.  

In February, the other major UK-based oil firm, BP, said in its latest strategy update that its goal is to produce more oil and gas in the short term in a move welcomed by the market.

Separately, Shell is set to exit Pakistan, after losses amassed in 2022, due to the devaluation of the Pakistani rupee and overdue receivables amid the economic crisis in the country.