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Shell’s board of directors announced in a statement that it has decided to reduce the oil major’s dividend to $ 0.16 per share from $ 0.47 in late 2019. This represents a reduction of 66%.
“Shareholder return is a fundamental part of Shell’s financial framework,” said Chad Holliday, chairman of the board of directors of Royal Dutch Shell, in a statement.
“However, given the risk of an extended period of economic uncertainty, lower commodity prices, higher volatility and uncertain demand prospects, the Commission considers that maintaining the current level of distributions to shareholders is not careful. “
Shell also said that net profit attributable to shareholders on the basis of the current cost of supplies (CCS) and excluding the items identified, which is used as an indirect indicator of net profit, was 2.9 billion dollars for the first quarter of 2020. That compares to 5.3 dollars. billion in the first quarter of 2019, reflecting a decline of 46% over one year.
Analysts polled by Refinitiv expected first quarter net profit of $ 2.5 billion for the quarter.
Shell shares fell more than 2% in early morning deals.
Last week, Norwegian Equinor became the first major oil company to cut its dividend this season. He said he was concerned that other energy giants could follow suit, although BP, which announced on Tuesday, maintained its dividend.
Investors will now be watching US oil majors Chevron and Exxon Mobil, which are expected to release their results on Friday.
Tamas Varga, a senior analyst at PVM Oil Associates, told CNBC by email that Shell had taken the “same approach” as Norway Equinor by cutting its quarterly dividend by about two-thirds.
“As the destruction of demand stings, money is king. Varga said, adding that the suspension of share buybacks, reduced capital spending and reduced dividends “are becoming the norm.”
“Extremely difficult” conditions
Shell CEO Ben van Beurden described energy market conditions in the first three months of the year as “extremely difficult”.
“Given the continuing deterioration in the macroeconomic outlook and significant medium and long-term uncertainty, we are taking further prudent measures to strengthen our resilience, support the strength of our balance sheet and support the creation of long-term value for Shell, “he said. added.
The energy giant’s results come soon after a historic drop in oil prices. The US West Texas Intermediate’s May contract fell below zero to trade in negative territory for the first time in history last week. The volume of transactions was low since it was the day before the contract expiration date, but, nevertheless, the drop was extraordinary.
WTI futures had brought in more than $ 60 a barrel at the start of the year. A dramatic drop in demand following the coronavirus epidemic has driven down oil prices.
WTI’s June contract traded at $ 16.55 a barrel on Thursday, nearly 10% higher for the session, while international benchmark Brent crude was $ 23.81, up about 5%.
Earlier this week, BP announced that first quarter net profit had dropped 67% from the same period a year earlier.