Shell to proceed with share buybacks as higher gas prices boost trading

Oil and gas major Shell said its $7 billion (€6 billion) share buyback programme, using the proceeds of last year's sale of its Permian Basin business to ConocoPhillips, would continue "at pace" in 2022.

The company, which has been under pressure from activists to demonstrate it can generate value for shareholders through the energy transition, announced the return of $1.5 billion of the proceeds from the sale to investors in December. The remaining $5.5 billion “will be distributed in the form of share buybacks at pace”, it said on Friday.

The trading update followed the first meeting of Shell's board in the UK since shareholders backed a proposal to simplify the Anglo-Dutch energy major's share structure and move its headquarters from the Netherlands to the UK.

Cash

Shell, the world's largest trader of liquefied natural gas, said trading results from its integrated gas business were expected to be "significantly higher compared to the third quarter 2021", but noted that production volumes had been affected by unplanned maintenance works, particularly in Australia.

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Gas prices, already at record levels, rallied further in December as demand for LNG soared, particularly in Europe.

Shell warned that cash flow from operations in the gas division was likely to be hit by the price volatility due to high margin payments. Shell added that cash flow in its oil division would be hit by about $1bn of outgoing payments for carbon emissions schemes relating to the sale of oil products in Europe and North America.

Shell completed the $9.5 billion sale of its assets in the US Permian Basin to ConocoPhillips at the start of December. It has promised to return $7bn of the proceeds to shareholders, with the rest to be used to strengthen its balance sheet. – Copyright The Financial Times Limited 2022