FTSE 100: Shell to cut spending and raise dividends

Shell’s capital spending in 2024 and 2025 will be reduced to between $22bn and 25bn a year, down from a planned $23-27bn this year. Photo: May James/Reuters

Shell (SHEL.L) has announced plans to hike its dividend and cut future spending as part of a simplification strategy to boost investor confidence.

It plans to increase shareholder distributions to 30-40% of cash flow from operations, up from a previous target of 20-30%.

This will start with a 15% increase in its dividend from the second quarter, and at least $5bn (£4bn) of share buybacks in the second half of the year.

Meanwhile, capital spending in 2024 and 2025 will be reduced to between $22bn and 25bn a year, down from a planned $23-27bn this year. It will also slash its annual operating cost by between $2bn to $3bn by the end of 2025.

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The move comes as the fossil fuel company said it has scrapped its plan to cut oil production by between 1-2% per year until the end of this decade. It is now looking to keep the amount of oil that it extracts from wells around the world at the same level as today.

Ahead of an investor conference in New York later today, shares in London ticked up 0.6% after opening.

“Our target of a reduction in oil production by 2030 has not changed. We’ve just met it eight years early,” Shell said, adding that it intends to grow its gas business.

The brief update added that the oil major is also conducting a strategic review of energy and chemicals assets on Bukom and Jurong Island in Singapore.

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“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,” its new chief executive Wael Sawan said.

“Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.”

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Shell currently has a target to cut its 2030 emissions intensity, including from the combustion of the fuels it sells, by 20%.

Last month it was revealed that Shell made record first-quarter profits of more than $9.6bn, despite oil and gas prices falling from last year’s highs.

This sat well above the $7.96bn predicted by industry analysts, and beat the company’s previous first-quarter record of $9.1bn for the same period.

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