Oil giant increases dividend and begins share buyback – .

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Oil giant increases dividend and begins share buyback – .


A Shell logo seen at a gas station in London. A court in The Hague has ordered oil giant Shell to cut carbon emissions by 45% from 2019 levels by 2030, in what is widely seen as a landmark case.
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LONDON – Oil giant Royal Dutch Shell on Thursday reported better-than-expected second quarter results, providing further support to the energy major’s plans to reduce net debt and reward investors.
The Anglo-Dutch company reported adjusted profit of $ 5.5 billion for the three months to the end of June. This compared to $ 638 million in the same period a year earlier and $ 3.2 billion for the first quarter of 2021.

Analysts expected adjusted second-quarter profit to be $ 5.1 billion, according to Refinitiv.

Shell increased its dividend for the second quarter in a row and announced the launch of a $ 2 billion share buyback program that it aims to complete by the end of the year.

The dividend rose to 24 cents in the second quarter, up 38% from the first three months of the year. It comes a year after the company decided to cut its dividend to shareholders for the first time since World War II.

“We need to make sure our current shareholder base is happy with what we’re doing in terms of payments,” Shell CEO Ben van Beurden told CNBC’s “Squawk Box Europe” on Thursday, reflecting on plans to the company to step up its distributions to shareholders.
“We need to have a strong cash-generating business that also finances the business for the future, but at the same time, we need to build a business that will stand the test of time. “

The results reflect a broader trend in the oil and gas industry, as energy majors seek to reassure investors that they have gained a stable base amid the ongoing coronavirus pandemic. The French TotalEnergies and the Norwegian Equinor have also announced share buyback programs.

Stock prices of the world’s largest oil and gas majors, however, have yet to keep pace with an improving earnings outlook, and the industry still faces a host of uncertainties and challenges.

Shell shares rose more than 3% during morning trading in London. The oil and gas company has seen its stock price rise more than 17% since the start of the year, after collapsing nearly 45% in 2020.

Investor skepticism

Shell’s financial results come as oil and gas prices have risen further in recent months. International benchmark Brent crude futures averaged $ 69 per barrel in the second quarter, compared to an average of $ 61 in the first three months of the year. The oil contract was last seen at $ 75.38.

Oil prices have rebounded to multi-year highs in recent months and the world’s three major forecasting agencies – OPEC, the International Energy Agency and the US Energy Information Agency – now expect a demand-led recovery to accelerate in the second half of 2021.

It follows a year in which the head of the IEA hinted that it could come to represent the worst in the history of the oil markets. The oil and gas industry was plunged into a spin in 2020 as the spread of Covid-19 coincided with a historic shock in fuel demand, falling commodity prices, unprecedented depreciations and tens of thousands job cuts.

Ahead of this earnings season, analysts had warned that even though energy companies were likely to try to claim a healthy state of health, investors are expected to harbor a “huge degree” of skepticism about the business models of oil and gas companies in the near future. long term. . This was mainly the result of the worsening climate emergency and the urgent need to move away from fossil fuels.

Court decision

Earlier this month, Shell confirmed its intention to appeal a landmark Dutch court ruling ordering the company to take much more aggressive action to cut carbon emissions.

“We agree that urgent action is needed and we will accelerate our transition to net zero,” Shell’s van Beurden said in a July 20 statement. “But we will appeal because a court judgment against a single company is not effective. “

“What is needed are clear and ambitious policies that will bring about fundamental changes throughout the energy system,” he added.

Members of the environmental group MilieuDefensie celebrate the verdict of the Dutch environmental organization’s case against Royal Dutch Shell Plc, outside the courthouse of the Courthouse in The Hague, the Netherlands, on Wednesday, May 26, 2021. Shell has been ordered by a Dutch court to slash its stronger and faster-than-expected emissions, dealing a blow to the oil giant that could have far-reaching consequences for the rest of the global fossil fuel industry.

Peter Boer | Bloomberg | Getty Images

The Dutch court ruled on May 26 that Shell must reduce its carbon emissions by 45% by 2030 from 2019 levels. This is a reduction well above the company’s current target of reducing emissions. by 20% by 2030.

The court ruling also said that Shell is responsible for its own carbon emissions and those of its suppliers, known as scope 3 emissions.

This verdict was believed to be the first time in history that a company was legally obliged to align its policies with the Paris Agreement. The agreement, ratified by nearly 200 countries in 2015, is seen as essential to avert the worst effects of climate change.

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