Shell announces $2bn share buyback after Q2 profits spike

Shell announced on July 29 it would buy back $2bn of shares and increase dividends by almost 40%, after reporting its highest quarterly profits since 2018.

The Anglo-Dutch major made headlines in April last year when it slashed its dividend by two thirds to $0.16/share following the onset of the coronavirus pandemic, marking its first reduction in payouts since the Second World War. But since then the company has sought to entice investors back, increasing its dividend to $0.1665/share last October and then $0.1735/share earlier this year.

Shell will raise its dividend by a further 38% to $0.24/share for the second quarter, the company announced on July 29. Despite this increase, the dividend still falls far short of the $0.47/share that Shell was paying prior to the pandemic.

Shell aims to complete the $2bn buyback scheme by the end of this year, and it still intends to increase its dividend by 4% annually from now onwards, as previously promised.

"We are stepping up our shareholder distributions today, increasing dividends and starting share buybacks, while we continue to invest for the future of energy," Shell CEO Ben van Beurden said in a statement, noting that the company's strong operational and financial performance and improved balance sheet justified these moves.

Shell generated $5.53bn in adjusted earnings in the second quarter, up from $3.23bn in the previous three months and $0.64bn in Q2 2020. It was the major's best quarterly result since Q4 2018, when it earned $5.69bn.

Upstream earnings came in at $2.47bn, reversing a $1.51bn loss a year earlier, while earnings from integrated gas surged to $1.61bn from $362mn. Shell's oil products business performed weaker, with earnings almost halving to $1.3bn from $2.41bn, while earnings from chemicals more the tripled to $670mn from $206mn.

The company earlier this month said it would increase shareholder returns to 20-30% of cash flow from operations beginning in the second quarter, noting that it had retired its $65bn net debt target. That target was almost reached in the second quarter, with net debt estimated at $65.7bn at the end of June.