Oil giant Shell raises dividends and launches $2 billion share buyback as commodity prices soar

July 30, 2021: On Thursday, Oil giant Royal Dutch Shell reported stronger-than-expected second-quarter earnings, which lends more support to the energy major’s plans to reduce net debt and reward investors.

The Anglo-Dutch company reports the adjusted earnings of $5.5 billion for the three months through June-end. That compared with $638 million over the same period a year before and $3.2 billion for the first quarter of 2021.

Analysts had expected the second quarter would adjust earnings to come in at $5.1 billion, according to Refinitiv.

Shell boosted its dividend for the second consecutive quarter and made an announcement of the launch of a $2 billion share buyback program aimed to complete by the year-end.

The dividend increase to 24 cents in the second quarter, up 38% from the year’s first three months. It comes a year after the company moved to cut its dividend to shareholders for the first time from World War II.

“We have to make sure that our present shareholder base is pleased with what we do in terms of payouts,” Shell CEO Ben van Beurden told CNBC on Thursday, reflecting on the plans of firms to step up its shareholder distributions.

“We have to have a strong cash generative business that also funds the company for the future, but at a similar time, we have to build a business that is future-proof.”

The results reflected a broader trend all around the oil and gas industry, as energy majors seek to reassure investors they have gained a stable footing between the ongoing Covid-19 pandemic. France’s TotalEnergies and Norway’s Equinor have made announcements for sharing buyback programs.

Share prices of the largest oil and gas majors of the world have not yet followed an improvement in the outlook of the earning. However, the industry still faces a host of uncertainties and challenges.

Shares of Shell were up above 4.5% in the early afternoon trade in London. The oil and gas company has seen its stock price grew above 17% year-to-date, having collapsed nearly 45% in 2020.

Shell’s financial results came as oil and gas prices took one more step up in recent months. International benchmark Brent crude futures increase to an average of $69 a barrel in the second quarter, up from $61 in the first three months of the year. The oil contract was seen trading at $75.38.

Oil prices have rebounded to hit multi-year highs in the last months. All three of the world’s leading forecasting agencies, OPEC, the International Energy Agency, and= the U.S. Energy Information Administration, now expect a demand-led recovery to pick up speed in the second half of 2021.