By Christian Moess Laursen


Shell said Wednesday that it will increase shareholder distributions, while outlining plans for $5 billion in buybacks and a reduction in capital spending.

The energy major said it will lift its shareholder distribution to 30%-40% of cash flow from operations through the cycle, with a 15% increase in dividend a share effective from the second quarter. Cash flow from operations is a measure of the cash a company generates from normal business operations.

RBC Capital Markets had expected a quarterly dividend increase of 20%. "The more modest dividend increase perhaps reflects the new management team's intentions on not wanting to over-promise on Day 1," RBC analyst Biraj Borkhataria wrote in research note following the update.

Capital spending will be reduced to $22 billion-$25 billion a year for 2024 and 2025, Shell said. For 2023, the company previously guided for capital spending of $23 billion to $27 billion.

Shell said it will continue to invest in secure supplies of energy, as it extends its position in the upstream sector to strengthen cash flow by stabilizing liquids production to 2030, it said.

"We will invest in the models that work - those with the highest returns that play to our strengths," Chief Executive Wael Sawan said.

In addition, the company said it will launch share buybacks of at least $5 billion for the second half of 2023.

Shell has been under pressure to increase dividends and share buybacks, moves that reward investors while keeping the company on a tight leash with its spending on businesses.

Shell has had a policy of spending 20% to 30% of its cash flow from operations on dividends and share buybacks.

"An enhanced focus on performance and stronger capital and cost discipline will underpin higher shareholder distributions of 30-40% of [cash flow from operations] through the cycle," Shell said.

Shell is planning to invest $10 billion to $15 billion in the development of low-carbon energy solutions, including biofuels, hydrogen, electric-vehicle charging and carbon capture and storage across 2023 to 2025.

The company will be investing in hydrogen and carbon capture and storage in a disciplined manner, as low-carbon energy projects will need to have the prospect for strong future returns and be scalable, Sawan said.

"We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonization of the global energy system," Sawan said.

Shell said it will repurpose its energy and chemicals parks to offer more low-carbon solutions to customers, while conducting a strategic review of energy and chemicals park assets in Singapore.

On Sunday, The Wall Street Journal reported the review is aimed at addressing what many investors view as lagging performance in the production of materials that go into everything from plastics and industrial machinery to lubricants and agricultural pesticides.


Write to Christian Moess Laursen at christian.moess@wsj.com


(END) Dow Jones Newswires

06-14-23 0424ET