Royal Dutch Shell shares jump as cash dividend reinstated
Shell introduced a scrip dividend programme in 2015 that gave shareholders the option of receiving payments in stock.
Shares in Royal Dutch Shell shot to the top of the FTSE 100 after the oil giant announced it was restoring its cash dividends after more than two years in the latest sign that the industry is emerging from an extended slump.
The company confirmed that it was cancelling the scrip dividend programme that was in place since 2015, which gave shareholders the option to receive payments in shares or cash as it battled tough market conditions and a plunge in oil prices sparked by lower demand and a glut in supply.
The changes – which reinstate a full cash payout – will come into effect for the fourth quarter interim dividend, the amount of which will be announced at the start of February.
Shell also increased its cash generation forecast- from $25 billion to $30 billion by 2020 – as Brent crude prices continue to hold above $60 per barrel, having fallen as low as $27.26 in January 2016.
Chief executive Ben van Beurden said: “We have increased our outlook for organic free cash flow, which has been consistently strong over the past five quarters.
“We have also made significant progress with our divestment programme, allowing us to reduce net debt in that time.
“Meanwhile, we intend to cancel our scrip dividend programme with effect from the fourth quarter 2017.”
Plans for a share buyback programme worth at least $25 million were also confirmed, but are still subject to progress in Shell’s debt reduction programme and “recovery in oil prices”.
Together, the announcements sent Royal Dutch Shell’s ‘A’ shares to the top of London’s blue chip index, up 3.5% or 81.5p to 2,397p.
The company’s ‘B’ shares were close behind, trading higher by 3.4% or 81.5p to 2,442.5p.
The firm also revealed on Tuesday that it was increasing investment in the development of “new energies” – which include wind and solar – from $1 billion to $2 billion per year until 2020.
Mr van Beurden said: “Our next steps as we reshape Shell into a world-class investment aim to ensure that our company can continue to thrive, not just in the short and medium term but for many decades to come.
“These steps build on the foundations of Shell’s strong operational and financial performance, and my confidence in our strategy and our ability to deliver on the promises we make.”
Royal Dutch Shell said that its $30 billion divestment programme, which began in 2016, “is almost delivered”, having clinched deals worth $23 billion, announced another $2 billion worth of deals and made “advanced progress” for sales worth a further $5 million.
“Once this programme is completed the company expects to continue divestments at an average rate of more than $5 billion until at least 2020,” Shell said.
Over the third quarter alone, Shell offloaded $187 million of upstream and $1.15 billion of downstream assets including a 50% share in SADAF, the petrochemicals joint venture in Saudi Arabia.
Shell also recently announced it had completed the sale of a package of North Sea assets for up to $3.8 billion (£3 billion) to smaller rival Chrysaor.
Earlier this month, the oil giant reported a 47% jump in adjusted earnings to $4.1 billion (£3 billion) in the third quarter, while total production rose 2% to 3.7 million barrels a day.