Shell pursues a $7 billion buyback 'at pace' despite LNG troubles

January 10, 2022: -Royal Dutch Shell said it would pursue its $7 billion share buyback program after selling its U.S. shale business “at pace” as its liquefied natural gas (LNG) production was again hit by unplanned outages.

A slowdown also hit fuel sales in global economic activity due to the spread of the omicron Covid-19 variant, Shell said in a trading update ahead of its quarterly results on February 3.

Shell, the world’s huge trader of liquefied natural gas, said that its production and liquefaction volumes were impacted by unplanned maintenance in Australia in the fourth quarter. A power outage hit its giant Prelude floating LNG vessel.

Shell said that LNG liquefaction volumes are expected to be amid 7.7 and 8.3 million tons, well below a peak of 9.2 million tons in the fourth quarter of 2019.

However, Shell’s LNG trading results in the fourth quarter of 2021 are set to be “significantly higher” compared to the third quarter.

Natural gas and electricity prices worldwide have soared since the middle of last year on tight gas supplies, and higher demand as economies rebounded from the Covid-19 pandemic.

Benchmark European gas prices and Asian LNG prices reach all-time highs in the fourth quarter.

Shell will later this month move its head office from The Hague to London, scrap its dual share structure, and change its name to Shell Plc as part of a plan to simplify its design and shift its tax residence from the Netherlands.

In the previous year, Shell sold its Permian Basin shale oil assets to ConocoPhillips for $9.5 billion in cash, an exit from the most significant U.S. oilfield. It shifted its focus to a clean energy transition. It said it could return $7 billion of the proceeds to shareholders on top of 20% to 30% of cash flow from operations.

“The remaining $5.5 billion of proceeds from the Permian divestment will be distributed in the form of share buybacks at pace,” it said.

Shell, which operates over 45,000 petrol stations, said that earnings from its marketing division were set to be less than the third quarter “the demand impact because of the Omicron virus and foreign exchange impacts in Turkey.”