Shell commits to raise shareholder returns

London — Shell on Tuesday pledged to return more cash to shareholders, mainly via buybacks, trimmed its investment budget through 2028 and raised the prospect of selling and closing some of its chemicals assets.

The energy giant raised its shareholder distribution target to between 40%-50% of cash flow from operations from 30%-40%.

The world’s biggest liquefied natural gas (LNG) trader also said it targeted a 4%-5% annual increase in LNG sales over the next five years and 1% annual production growth, while keeping oil output stable at 1.4-million barrels a day.

Shell estimates global demand for LNG will rise about 60% by 2040, driven largely by economic growth in Asia, the impact of AI and efforts to cut emissions in heavy industries and transportation.

Shell produced 29-million tonnes of LNG and sold 65.8-million tonnes 2024.

The group said in a statement on its capital markets day that it wanted to explore “strategic and partnership opportunities” in the US for its chemicals assets and might close some businesses in Europe.

Shell also trimmed its annual investment budget to a $20bn-$22bn through 2028 from $22bn-$25bn after spending $21.1bn last year.

Shell had spent about $8bn by the end of last year of a $10bn-$15bn investment budget on low-carbon solutions set for 2023 to 2025. It said by the end of the decade it would have as much as 10% of its capital employed — a measure of the sum of total equity and debt — in “lower carbon platforms”.

A Shell spokesperson declined to give an investment figure for its low-carbon businesses beyond 2025.

Shell’s shares gained about 1.8% in early trading, outperforming a 1.1% rise of a broader index of energy companies .

“The guidance looks better than expected, with higher cost reductions, capex guidance coming in lower at the midpoint versus consensus, and higher shareholder returns than anticipated,” RBC analyst Biraj Borkhataria said of the “boring but good” update.

Shell has a $3.5bn share buyback plan in place for the current quarter, making this the 13th consecutive quarter of at least $3bn of share repurchases.

When reporting full-year results in January, Shell hiked its dividend to about $0.36, in line with its 4% dividend growth policy, which it confirmed on Tuesday.

Shell said in the update it aimed for annual free cash flow growth per share of more than 10% to 2030, while delivering $5bn-$7bn in cumulative cost cuts between 2022 and the end of 2028.

Reuters