Shell shares bubble up as oil giant increases investor returns
Shares in Shell pushed up this morning as the oil giant said it would increase shareholder returns to 20-30 per cent of its cash flow, surprising analysts with the speed of the move.
The stock rose 3.0 per cent in early trading, topping the FTSE 100 tree, on the back of the second quarter trading update.
The Anglo-Dutch firm said that its “strong operational and financial delivery, combined with an improved macroeconomic outlook”, had convinced it to take the step.
According to Jefferies, such a move is equivalent to an incremental payout of $1bn-$2bn per quarter.
It also said that it would “retire” its $65bn net debt target, which it had previously said was the point at which it would increase shareholder returns. Shell did not say if it had hit the target.
The firm added: “In the second quarter, Shell expects to have further reduced its net debt, although the extent of the reduction will be moderated by working capital movements.”
Oil prices have continued to push higher in the last three months, hitting their highest levels since 2014 yesterday after the latest meeting of producer alliance Opec+ broke up without an agreement on supply, prompting them to crash.
In the first quarter, the rise in prices helped Shell post profit of $3.2bn, allowing it to boosts its dividend.
Commenting on the increased returns, JP Morgan analyst Christyan Malek said it was “an important milestone that highlights the strength of Shell’s free cashflow proposition and sends an important message to the market”.
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