Shell raises divi as Q3 beats forecasts

Oil giant Shell has increased payouts to shareholders following a better-than-expected third quarter, months after cutting its dividend for the first time since the Second World War.

Shell plans to increase its dividend by around 4 per cent. Picture: James Goldman/Shell International.
Shell plans to increase its dividend by around 4 per cent. Picture: James Goldman/Shell International.

Shell said current cost of supply (CCS) earnings were $177 million (£136m) in the three months. It is a 97 per cent reduction from last year, but still beat analyst forecasts of $146m.

The firm was left reeling three months ago when its CCS losses reached $18.4 billion in the second quarter after it was forced to reassess how much oil it had in untapped reserves would sell for. A small profit was therefore a positive for the company.

As a result, Shell said it was planning to increase its dividend by around 4 per cent to 16.65 cents per share for the third quarter of the year.

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Reaction: Oil giant Shell suffers profit slump but still banks £12 billion

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Chief executive Ben van Beurden said: "The strength of our performance gives us the confidence to lay out our strategic direction, resume dividend growth and to provide clarity on the cash allocation framework, with clear parameters to increase shareholder distributions.”

Oil giants have faced a double challenge this year, dealing with plunging oil prices, some of which turned negative for a short while in April, and increased pressure to set new environmental goals. Shell and UK rival BP have pledged to lower emissions to net zero by the middle of the century. Shell said last month that it was planning to cut thousands of jobs worldwide.

David Kimberley, an analyst at Freetrade, said: "Undoubtedly, we are moving towards a renewable future. But this is not going to happen overnight and claims that the pandemic has accelerated this process seem misplaced and overly optimistic.

"It's worth remembering that there was a dip in energy usage and similar claims about a green future after the last financial crisis. Instead we got a decade of sustained growth in hydrocarbon usage. With demand for electricity in most European countries back to pre-pandemic levels and cheap oil on the market, it's unlikely the predicted green future is going to be appearing any time soon."

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Shell said its adjusted earnings were $1bn in the third quarter, and its cash flow from operating activities was $10.4bn, down 15 per cent from the same time last year. Free cash flow hit $7.6bn.

Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said: “There are some bold moves from Royal Dutch Shell in today’s update. Only six months or so after cutting its dividend for the first time since World War Two, Shell has set out a road to recovery for the business and shareholders, including a progressive dividend policy.

"With the share price at multi-decade lows, there was a lot of pessimism about Shell going into these results. But, like rival BP, it has set out a plan to transition to a low carbon world, investing for growth, cutting costs and re-balancing its asset portfolio, while trying to remain an attractive investment proposition.

"There could still be short-term volatility to come in demand for oil, which will likely weigh on Shell. However, on the face of it, there is a positive direction of travel here that should go some way towards assuaging concerns about Shell’s long-term direction of travel.”

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