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Shell unveils £18.9bn share buyback as half-year earnings jump

The oil group said half-year earnings surged 37%, but revealed a lower-than-expected 30% rise for the second quarter.

Oil giant Royal Dutch Shell has launched a hotly anticipated 25 billion US dollar (£18.9 billion) share buyback programme as it revealed a leap in earnings.

The stock repurchase announcement has been promised to investors since Shell bought rival BG Group in a mammoth 54 billion US dollar (£41 billion) deal in 2016.

But shares in Shell slipped nearly 2% as its second quarter earnings came in lower than expected, despite rising 30% to 4.7 billion US dollars (£3.6 billion).

The old market adage of 'Never sell Shell' is holding firm as the company has unveiled something of a bonanza for shareholders Richard Hunter

Overall in the first half of 2018, underlying earnings on a current cost of supply basis jumped 37% to 10.1 billion US dollars (£7.7 billion) for the six months to June 30 thanks in part to surging oil prices.

Ben van Beurden, chief executive of Shell, said: “We are taking another important step towards the delivery of our world-class investment case, with the launch of a 25 billion US dollar share buyback programme.

“This move complements the progress we have made since the completion of the BG acquisition in 2016.”

It said it will buy back at least 25 billion US dollars (18.9 billion) over the next 18 months, subject to efforts to cut debt and global oil prices.

Shell has been focusing on an ambitious cost-cutting drive and a 30 billion US dollar (£22.7 billion) divestment initiative since the industry has been buffeted by the 2014 oil price crash.

But oil prices have rebounded recently, with Brent crude rising from around 50 US dollars a barrel a year ago to about 75 US dollars today.

Shell said it had so far completed around 27 billion US dollars (£20.5 billion) of asset sales, with over another 7 billion US dollars (£5.3 billion) announced or in advanced progress.

Its results showed that oil and gas production rose 5.4% on an underlying basis year-on-year in the second quarter, but was lower than the previous three months.

Richard Hunter, head of markets at interactive investor, said it was an “impressive update” despite missing City expectations.

“The old market adage of ‘Never sell Shell’ is holding firm as the company has unveiled something of a bonanza for shareholders,” he said.

Rival BP reports half-year earnings next week.

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