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Shell profit slump could slow $25bn share buyback timetable

By Alison Hunt

Oil giant books 15% drop in earnings amid falling demand for oil and trade tensions

Royal Dutch Shell warned today that its $25bn (£19bn) share buyback programme could be slowed by uncertain economic conditions after strong third-quarter profits beat expectations.

Since the 2014 oil industry downturn the company has had a marked transformation, cutting costs, restraining spending and selling assets to reduce debt. This had brought better-than-expected results, despite oil prices falling 17 per cent year on year.

However, the company could be hit by slowing world demand for oil and gas and tensions between the two largest energy consumers, the US and China. In the past three months the company made $4.8bn (£3.7bn), compared with $5.6bn in the same period last year, a 15% slump.

The oil giant is the world’s biggest dividend payer at $16bn a year. However, Shell issued shares to existing investors instead of dividends when oil prices were low, in a bid to retain cash. It is now under pressure to pay back investor patience by buying back shares. The company plans to boost payouts to investors to $125bn, between 2021 and 2025 through dividends and share buybacks.

Shell has announced that it has started its next tranche of buybacks of up to $2.75bn by January 2020, having already acquired $12bn worth of shares since July 2018.

CEO Ben van Beurden said in a statement that the company’s intention to buy back $25bn of shares by the end of next year remains unchanged.

He added: “The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25 per cent and completing the share buyback program within the 2020 timeframe.”

Royal Dutch Shell plc
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