Shell Gains On Plans To Return More To Shareholders

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Investing.com – Royal Dutch Shell (NYSE:RDSa) was up 2% in Wednesday’s premarket trading after the oil and gas giant said it will accelerate its plans to return money to shareholders after a sharp rise in crude and gas prices.

In a trading statement ahead of its quarterly results which are due July 29, the Anglo-Dutch company said the acceleration of its planned distribution policy was due to “strong operational and financial delivery, combined with an improved macroeconomic outlook.”

It said it will increase total shareholder distributions to 20%-30% of cash flow from operations, starting at the Q2 results announcement. It had previously tied a promise of higher payouts to progress in reducing net debt. However, it said on Wednesday that it had ‘retired’ the target of getting net debt below $65 billion, without saying whether or not it had reached it. 

At the end of the first quarter 2021, Shell’s net debt was $71.3 billion.

The company said that its 2021 cash capex will remain below $22 billion, but noted that it would budget for a rise in working capital. 

Oil prices hit their highest in nearly seven years on Monday after the so-called OPEC+ group of producers failed to agree an output policy beyond July. All other things being equal, that will tighten the global market further. However, prices fell on Tuesday amid concern that the dispute within OPEC over market share could lead to a resumption of last year’s price war.

The United Arab Emirates in particular rejected a proposed eight-month extension to output curbs, but it has claimed that other members are also dissatisfied with a production agreement that it says favors Russia and Saudi Arabia.

Goldman Sachs (NYSE:GS) expects Brent Brent Oil Futures crude prices to be around $80 a barrel this summer. At 6:17 AM ET, crude Crude Oil WTI Futures was 1.7% higher at $74.65 a barrel and Brent 1.5% up at $75.67.