BAKU, Azerbaijan, May 4
By Leman Zeynalova - Trend:
More cash flow from Shell’s oil and gas cash operations will be available for renewables, Trend reports citing Wood Mackenzie.
Royal Dutch Shell announced that it was cutting its quarterly dividend for the first time since World War II: a 66 percent reduction to 16 cents. Ben van Beurden, chief executive, said the cut was intended to bolster resilience and strengthen Shell’s balance sheet, “given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty”.
The move was announced as Shell reported a 46 percent drop in earnings for the first quarter and warned that the second quarter would be worse, as it faced “unprecedented and intense economic headwinds”. It is cutting annual operating costs by $3-4 billion from 2019 levels, and has lowered its capital spending budget for 2020 to less than $20 billion, down from a previously planned $25 billion.
The dividend cut did not exactly come out of the blue. Simon Flowers, Wood Mackenzie’s chief analyst, argued more than a month ago that there was “a strong argument” for the oil majors to cut their payouts. There was still a negative response from investors, however: Shell’s shares fell by over 11 percent last Thursday.
But even as the company is taking these radical steps to strengthen its financial position, it is pledging to stay the course on cutting emissions. Van Beurden told analysts in a presentation that Shell was “protecting some of our spend across all of our businesses, including power, to continue to provide lower-carbon energy products and solutions today while building profitable lower-carbon energy business models for the future.”
Luke Parker, a Wood Mackenzie vice-president of corporate analysis, said a permanent dividend reset from Shell would help build those businesses, funding “an accelerated strategic pivot to 'Big Energy’.” More cash flow from Shell’s oil and gas cash operations will be available to be invested in renewables, EV infrastructure, and other low-carbon technologies.
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