Shell announced on Tuesday that it plans to increase shareholder distributions, emphasizing its commitment to strengthening its liquefied natural gas (LNG) production and maintaining steady oil output through 2030.
The UK-based energy giant, aiming to narrow the gap in valuation with U.S. rivals ExxonMobil and Chevron, said it would raise shareholder payouts to 40-50% of cash flow from operations (CFFO), up from the previous range of 30-40%. The company will also prioritize share buybacks and continue its policy of raising dividends by 4% annually.
The market responded positively, with Shell’s stock rising 2% in London following the announcement.
In addition to boosting shareholder returns, Shell raised its cost-cutting target. The company now aims to reduce structural costs by $5-7 billion by 2028, up from its previous goal of $2-3 billion by the end of 2025.
Shell also adjusted its capital expenditure plans. It will invest $20-22 billion annually through 2028, a reduction from the $22-25 billion range it had projected for the same period in 2023. For reference, Shell’s capital expenditure was $21 billion last year.
Shell’s updated strategy is designed to reduce costs and increase shareholder returns, while strengthening its LNG business. The company plans to grow LNG sales by 4-5% annually through 2030. Additionally, Shell aims to increase overall production from its Upstream and Integrated Gas divisions by 1% per year, maintaining its target of 1.4 million barrels of liquids per day.
CEO Wael Sawan highlighted the company’s focus on value creation and disciplined performance, emphasizing Shell’s goal of becoming the leading integrated gas and LNG business globally. Sawan also reiterated the importance of maintaining a significant level of liquid production while pursuing growth in LNG.
“We want to be the most customer-focused energy marketer and trader, while growing our LNG business,” Sawan said. “Today, we are raising the bar across our financial targets, investing where we have competitive strengths, and delivering more for our shareholders.”
Shell’s new strategy follows its 2023 decision to refocus on oil and gas, while selectively investing in renewable energy. Sawan has previously stated that reducing global oil and gas production would be “dangerous and irresponsible,” citing the ongoing need for hydrocarbons in the global energy mix.
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