Yahoo Finance Shell ups share repurchases and dividend as earnings surge
Shell (SHEL.L) found favour with investors on Thursday after it announced it was expanding its share repurchases thanks to soaring energy prices driving profit.
The oil giant said it would return the extra cash to shareholders through a $8.5bn share buyback, including $5.5bn in proceeds from the sale of oilfields in the Permian basin.
It will also use the funds to help shore up its finances and pay down its debt pile.
Shell also revealed that its adjusted net profit climbed to $6.4bn in the final quarter of last year, up from just $393m the previous year, and $4.13bn in the three months to September.
This beat average analyst estimates of $5.2bn.
Annual profits came in at $17bn for 2021, swinging into the black from a loss of almost $20bn in 2020 when energy prices slumped during the pandemic.
The group’s adjusted earnings for last year rose to $19.3bn from $4.8bn.
Read more: Why Shell is scrapping its dual listing structure
Surging oil and gas prices has meant the company has been selling gas for more than double the price it was receiving six months ago, with its upstream unit making sales at $8.88 per thousand cubic feet compared to $4.31.
Brent crude oil (BZ=F) is currently trading near record highs of $88 per barrel, trading around its highest in three years. The recent price increase has seen petrol prices soaring to record highs.
“2021 was a momentous year for Shell. We launched our Powering Progress strategy and simplified our share structure and organisation. Progress made in 2021 will enable us to be bolder and move faster,” Ben van Beurden, chief executive, said.
“We have a compelling strategy, with customers at its core. We have ambitious plans to generate shareholder value, to decarbonise our products and to provide energy to our customers while respecting nature.”
The firm added that it was also raising its dividend by 4% to 25 cents a share in the first quarter. Shell also paid down $4.9bn of borrowing in the fourth quarter, reducing net debt to $52.6bn compared with $75.4bn a year earlier.
The positive news on Thursday sent shares 2% higher on the day.
“The big upswing in full year profit and the lifting of the dividend to 4% has been greeted with some cheer by shareholders,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said. “However, there will be plenty of stony faces around, given the results come just hours before families find out just how much their energy bills will rise by.
She added: “This is likely to add to the clamour for a temporary windfall levy on North Sea producers with the region considered to be one of the most profitable areas in the world for extraction after the government cut taxes to encourage production.
Shell was the sixth-largest gas producer in the UK’s North Sea last year, according to data from consultancy Rystad Energy.
The results come after Shell scrapped its Anglo-Dutch dual-share structure and relocated its headquarters from Amsterdam to London amid pressure from activist investor Dan Loeb.
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Richard Hunter, head of markets at Interactive Investor, said: “The combination of share listings and the effective move back to the UK have been part of a pivotal year for Shell. The company believes that the new structure will both simplify operations as well as enabling a more nimble approach to the years ahead.
“Indeed, there have already been calls by some activist investors for Shell to split itself in two, with the traditional “brown” oil and gas operations separated from a new “green” business.
“The company has rejected such calls, pointing out that the green business would not be financially sustainable as a sole entity and that the income from the brown business was still required for the significant investment to come.
“The share price has risen by 47% over the last year, as compared to a gain of 17% for the wider FTSE100, and Shell remains the preferred oil major play, with the market consensus coming in at a strong buy.”
Watch: Oil price and energy stocks having a strong 2022 so far
