Shares in oil major Royal Dutch Shell (RDSB) advanced 3.4% to £14.70 as it unveiled plans to boost dividends off the back of an improving economic outlook.
Shell said that, subject to final board approval, it would increase shareholder distributions to within the range of 20-30% of cash flow from operations, starting at its second-quarter results announcement.
It pinned the decision on ‘strong operational and financial delivery, combined with an improved macro-economic outlook’.
Crude prices have been staging a recovery as high coronavirus vaccination rates in some developed nations allow them to roll back lockdown restrictions and producers’ cartel OPEC has reached a stalemate over output increases.
SIGNIFICANT REDUCTION IN BORROWINGS
Shell said that in the second quarter it expects to have further reduced its net debt, although the extent of the reduction would be moderated by working capital movements.
‘In conjunction with the increased distributions, Shell will retire its net debt milestone of $65 billion and will continue to target further strengthening of its balance sheet and AA credit metrics,’ it said.
AJ Bell investment director Russ Mould commented: ‘The continuing volatility in oil prices means managing an oil and gas business like Shell remains a high-wire act. To put the see-saw nature of the market into context, oil has traded at multi-year lows and more recently at multi-year highs all in less than 18 months.
‘Such wild swings in the oil price make the kind of long-term planning and investment Shell will require to successfully transform itself into an energy business fit for a post fossil fuels future a real challenge.’
