ii view: Shell underlines focus on shareholder returns

Second-quarter results to 30 June

• Adjusted profit down 56% to $5.1 billion (£4 billion)
• Dividend up 15% to 33 US cents per share
• Commencing a new $3 billion share buyback programme (£2.4 billion)
• Net debt down 13% to $46.4 billion (£36.7 billion)

Guidance:

• Expects a share buyback programme of at least $2.5 billion in Q3
• Reduced upper end of expected full-year capital spending by $1 billion to between $23-$26 billion

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Chief executive Wael Sawan said: “Shell delivered strong operational performance and cash flows in the second quarter, despite a lower commodity price environment.

“Today we are delivering on our Capital Markets Day commitment of a 15% dividend increase. We are going further on our buyback guidance by commencing a $3 billion programme for the next three months and, subject to board approval, at least $2.5 billion at the Q3 2023 results. As we deliver more value with less emissions, we will continue to prioritise share buybacks, given the value that our shares represent.”

ii round-up:

Energy giant Shell (LSE:SHEL) operates across several divisions including integrated gas, chemicals and products and renewables and energy solutions.

Alongside its upstream exploration and production business, its downstream operations serve around 32 million retail customers a day at 46,000 service stations. 

In 2022, it changed its name from Royal Dutch Shell to just Shell, moving its headquarters from the Netherlands to the UK. 

For a round-up of these latest results announced on 27 July, please click here. 

ii view:

Founded in 1907, Shell today competes against rivals including BP (LSE:BP.), TotalEnergies SE (EURONEXT:TTE) and Exxon Mobil Corp (NYSE:XOM). A constituent of the FTSE 100 index, it employs over 90,000 people across more than 70 countries. Its strategic focuses include growing shareholder value, maintaining financial discipline and a strong balance sheet, and becoming a net-zero emissions energy business by 2050.

For investors, global economic uncertainty with an emphasis on the stuttering progress of the Chinese economy now raise questions over expected future energy demand. Energy prices have subsequently fallen following the start of the war in Ukraine, but costs generally for businesses remain elevated, while tackling climate change remains a pressing need for both the industry and governments alike. 

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On the upside, its diversity of operations across oil, gas, chemicals and alternatives regularly allows one arena of strength to counter another one of weakness. Elevated energy prices following the war in Ukraine have pushed group cash flow higher allowing Shell to reduce debt and raise shareholder returns following a cut under the pandemic, while hopes that interest rates could be somewhere near their peak now persist. 

For now, and with the shares sat on an estimated future dividend yield of over 4% and the consensus analyst estimate of fair value standing at close to £29 per share, this energy major looks set to continue justifying its place in many diversified investor portfolios. 

Positives: 

• Diversity of operations
• A focus on shareholder returns

Negatives:

• Uncertain economic outlook
• The weather can raise operational challenges

The average rating of stock market analysts:

Buy