Shell shareholders miss out on payday under weight of $74bn debt mountain
The oil giant has promised more cash for investors – but not until debt has fallen to $65bn (£47bn)
Shell shareholders are to be kept waiting for higher dividend payouts as the oil giant labours under a massive debt pile.
The Anglo-Dutch company has pledged to distribute up to 30pc of cash flow to shareholders as soon as its debts come down to $65bn (£47bn), as it tries to keep investors on board while it moves towards lower carbon energy.
However analysts at Citi expect Shell’s debts to have fallen by less than $2bn to about $74bn when its reports quarterly results on Thursday. Citi said Shell was “still a way from the $65bn needed to trigger higher capital returns”.
The sum is in part a legacy of its $50bn takeover of rival BG Group in 2016, which has been a major boost to the company but pushed debts up to $80bn that year, prompting a $30bn asset sale. Debt is becoming more problematic at a time when the value of assets can plunge due to volatile oil prices.
The oil industry endured a torrid 2020 as crude prices plunged due to falling demand in the pandemic. Shell reported a $21.7bn annual loss in what bosses deemed an “exceptionally challenging year”. Both Shell and BP cut their dividends.
Oil prices have since recovered with WTI at $62.10 per barrel on Friday and Brent Crude at $66.01, back at pre-pandemic levels.
In a trading update in April, Shell said it expects to report profit from its oil production division for the first time since the start of the pandemic.
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