Shell Signals End Of Austerity Returning To All-Cash Dividend

Royal Dutch Shell is canceling its scrip dividend program effective this quarter, in a sign that it has really left the worst consequences of the oil price crash behind it.

“The cancellation means that the fourth quarter 2017 Interim Dividend and future dividends will be settled entirely in cash, rather than the Company offering a share-based alternative,” Shell said on Thursday about the plan under which investors could choose to be paid in shares instead of in cash.

With the end of the scrip dividend, Shell will be paying all-cash dividends for the first time since 2015.

Earlier this month Shell topped forecasts with its Q3 earnings, but it didn’t announce then that it would be ending the scrip dividend program. Analysts were hoping for such announcement at Shell’s investor day today, and they got it.

Apart from the removal of the scrip dividend, Shell confirmed “the plans for share buybacks of at least $25 billion in the period 2017-2020, subject to progress with debt reduction and recovery in oil prices.”

Shell also raised its outlook for annual organic free cash flow to $25 billion-$30 billion by 2020 at a Brent crude oil price of $60 per barrel—which is $5 billion higher than in the outlook Shell provided in June 2016.

The group also expects to deliver $10 billion of cash flow from operations from new projects by 2018, at a $60 barrel.

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Shell is also nearing completion of its $30 billion divestment program between 2016 and 2018, with deals worth $23 billion completed, another $2 billion announced, and $5 billion in advanced progress.

Capital discipline will remain tight, with annual capital investment still between $25 billion and $30 billion, and at current oil prices capital investment will be managed towards the bottom end of that range, or lower if needed, Shell said.

Shell is also raising the capital allocated new energies to $1 billion-$2 billion per year until 2020, from $1 billion now.

Following the plan update, Shell’s shares in London were up by more than 3 percent at noon, and up 3.20 percent in pre-market trade in New York at 7:04 a.m. EST.

By Tsvetana Paraskova for Oilprice.com

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