Shell Surprises With Strong Profit, Dividend Hike

Royal Dutch Shell reported better than expected financial results for the third quarter and hiked its dividend in a surprise move targeting investors who are getting increasingly anxious about their exposure to oil and gas.

"We must continue to strengthen the financial resilience of our portfolio as we make the transition to become a net-zero emissions energy business," chief executive Ben van Beurden said.

"Our decisive actions taken earlier in the year have solidified our operational and cash delivery. The strength of our performance gives us the confidence to lay out our strategic direction, resume dividend growth and to provide clarity on the cash allocation framework, with clear parameters to increase shareholder distributions."

Thanks to its stronger than expected performance, the company said it would increase the dividend by 4 percent to some $0.1665 per share, beginning with the third quarter of this year.

In its report, Shell also said that it planned to reduce net debt to $65 billion from $73.5 billion at the end of the third quarter of 2020. Once this was accomplished, Shell said, it plans to distribute between 20 and 30 percent of cash flows to its shareholders.

Like the rest of the supermajors, Shell has been adversely affected by the price slump caused by the pandemic this year and has, as a result, expanded its commitments to a cleaner energy future for its business.

Last month, the company said it could shrink its core oil and gas operations by up to 40 percent in a bid to reorient its business more towards renewable energy. Shell is also looking at ways to cut costs in its biggest division currently, the upstream, by 30 to 40 percent via cutting operating costs and slashing capital expenditure on new oil and gas exploration and production projects. By 2050, the supermajor plans to become a net-zero emissions company.

By Irina Slav for Oilprice.com

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