Shell U-Turns on Oil Reduction Plan

Shell has changed its mind on reducing oil production and announces a share buyback initiative

Alliance News 14 June, 2023 | 10:51AM
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Shell (SHEL) will keep crude oil production steady until 2030 instead of a previously planned cut of 1% to 2% per year until the end of the current decade, the company has announced.

The plan is now to stabilise liquids production to 2030, a move from chief executive Wael Sawan, who started his role at the start of 2023. It effectively scraps the plan of predecessor Ben van Beurden.

This was revealed in an investor update today, Wednesday, where Sawan said the company’s strategy was to create more value with less emissions, and deliver increased shareholder returns through a balanced energy transition.

Meanwhile, the London-based oil major announced a planned $5 billion share buyback amid a plan to reduce operating costs and spending.

Shell said it plans to buy back shares for at least $5 billion in the second half of 2023, subject to board approval. This is 25% larger than the ongoing $4 billion share buyback programme that Shell had announced when it released its 2022 results in February. That programme will be completed before Shell releases its half-year results on July 27.

Furthermore, Shell aims to reduce capital spending to between $22 billion and $25 billion per year for 2025, compared to $22.60 billion in 2022. Cash capital spending was $24.83 billion.

Annual operating costs are set to be reduced by $2billion to $3 billion by the end of 2025. In 2022, operating costs had widened 9.8% annually to $39.48 billion from $35.96 billion.

Meanwhile, Shell plans to reduce emissions from its operations by 2050 and invest $10 billion to $15 billion until 2025 to support the developing of biofuels, hydrogen, electric vehicle charging and carbon storage and capture.

Sawan said: "we are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future […].

"We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths."

Shell shares were 0.6% higher at 2,309.50p each in London on Wednesday morning.

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