Oil and gas giant Shell in €111bn investor pledge

Oil-and-gas giant Shell plans to shower its investors in money, pledging returns of $125bn (€111.2bn) between 2021 and 2025. That’s twice as much as a decade earlier.

The firm says it can pull off this feat with crude at $60 a barrel and with only a small increase in capital spending, an aggressive move to keep shareholders on its side while it weathers a disruptive transition to lower-carbon energy.

The Anglo-Dutch company has already sought to stand out from some of its peers, who are boosting spending to get more barrels of oil and gas.

“We want to position the company for the future of energy,” chief executive, Ben van Beurden, said.

The future will involve oil and gas, by the way. But it will also be a future where much more of the dynamics of the market are dictated by the customer.

Shell expects new projects to generate a torrent of cash — as much as $35bn a year by 2025 — that it can use to enormously boost distributions to investors as dividends and buybacks, it said in a statement.

It is in the middle of repurchasing $25bn of stock by the end of 2020, and said it expects to increase the dividend per share “when there is line of sight to the completion” of that programme. Shares in the firm fell almost 1%, compared with a 0.3% decline in the European energy sector.

Shell didn’t break out how much of the $125bn in distributions would come from higher dividends. That figure compares to $52bn in payouts from 2011 to 2015, and an expected $90bn from 2016 to 2020.

It raised its annual capital investment estimate to an average $30bn in the five years to 2025, going no higher than $32bn in the period. That’s up from its current annual budget of $25bn to $30bn.

The figure includes small acquisitions of less than $1bn, but excludes “major inorganic opportunities.”

Shell also offered a new way to think about the company, breaking its strategy into three themes: core upstream, leading transition, and emerging power.

The upstream segment includes deepwater, and shale and conventional oil-and-gas projects. Notably, Shell didn’t pledge a boost in hydrocarbon production, but, instead, said it would “sustain” the business.

The transition theme incorporates the work of its integrated gas, chemicals, and oil products businesses, while emerging power “will focus on creating business models to meet evolving customer demands.”

Bloomberg