Shell’s chief executive has tried to increase investor confidence by increasing its dividend, cutting spending and abandoning plans to reduce oil production every year.
The largest oil and gas company in Europe said that it will increase its dividends by 15% from the second quarter. It also plans to increase the cash flow share it returns to investors from 20-30% to between 30- 40%.
The company has pledged to purchase at least $5 billion worth of its own stock in the second half, although this is less than the current rate of buyback of $4 billion every quarter.
Shell announced that its capital expenditures would drop to $22 billion to $25 billion per year over the next two-year period, from $23 billion to $27 billion currently. Shell also plans to reduce its operating costs up to $8 per cent or $3 billion by the year 2025.
After making deeper cuts than anticipated, the group sparked outrage among environmental groups when it announced that it would “stabilise”, or reduce, oil production by 1-2 per cent annually.
Shell’s CEO, Wael Sadan said, “We invest to provide secure energy to customers today and in the future, while transforming Shell into a winner in a low carbon future.” As we allocate capital, performance, discipline and simplification will guide us. This is to enable the energy transition while increasing shareholder distributions.
Shell operates in over 70 countries, and last year it made a record profit of 40 billion after taking advantage of high energy prices.
Sawan became Shell’s chief executive in January and is trying to increase the company’s value, which has been lagging behind its oil-focused American competitors. However, the group still stands by its goal of being “a net zero emissions energy business by the year 2050”.
Ben van Beurden was Shell’s former chief executive. He said that two years earlier, oil production in this decade would fall by between 1 and 2 percent per year from its peak of 2019. Ben van Beurden, Shell’s former chief executive, said two years ago that oil production would decline by 1 to 2 per cent each year this decade from a peak in 2019.
Shell’s oil production has fallen to a similar level, despite the fact that it had made deeper cuts than anticipated in recent years. Shell announced that it would stop cutting its oil production for the remainder of the decade, and instead “stabilise liquids production until 2030” to achieve cash flow longevity.
A spokesperson said: “The goal for reducing the oil production by 2030 is unchanged.” We just achieved it eight years earlier.”
Nevertheless, campaigners claim that continued reductions will be needed to combat climate change. Global Witness’ Jonathan Noronha Gant, a senior campaigner, stated: “Record profits from the energy crisis could be used to boost green investments.” It’s instead shareholder payouts and an increase in climate-destroying fossil fuels.
Shell announced that it would invest $10-15 billion over three years in low-carbon energies, up from $4.3 billion invested in 2022. Shell will invest in “biofuels and hydrogen, electric vehicle charging, and CCS”, and only “selectively”.