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21 Sept 2021

Shell Jumps on Promise to return $7 Billion to its Shareholders

The Index Today

The Royal Dutch Shell ADRs traded 4% higher in premarket Tuesday on the energy giant’s as they plan to return to shareholders a large part of the cash it will get from the sale of Permian assets to ConocoPhillips.

According to the reports, under the deal which was announced by the companies last Monday, Shell has agreed to sell all its assets from the most active U.S. oil field, to ConocoPhillips for around $9.5 billion. From this money, Shell plans to return to shareholders $7 billion in the form of dividends and buybacks. This will be in addition to the 20%-30% of cash flow from operations the company plans to return to its shareholders on a routine basis.

The company said that the remaining cash will be used to strengthen the balance sheet.

The deal is part of the broader industry-wide shift towards cleaner energy, which is forcing Shell to focus on its most profitable high-carbon businesses and grow a portfolio of lower-carbon assets. Just last week, Shell announced plans to build one of Europe’s biggest biofuels facilities, a 820,000-ton per year unit in the Netherlands.

Shell's exit from the Permian is a recognition that it cost too much to expand its presence there to optimal scale.

At this stage, the company said around 60% of its production in the Gulf of Mexico is back online.

©Photo: Peter Boer/Bloomberg

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