Shell says it will lift shareholder distributions, slash spending; stock climbs

Investing.com -- Shell PLC (LON:SHEL) on Tuesday outlined plans to boost shareholder returns and reduce spending as it sharpens its focus on liquefied natural gas (LNG). The company’s shares rose more than 1% in London trading.

The energy major said it will increase shareholder distributions to 40–50% of cash flow from operations, up from the previous 30–40% range.

It also reaffirmed a progressive dividend policy of 4% annual growth and aims to raise free cash flow per share by more than 10% annually through 2030.

The announcement came ahead of the company’s Capital Markets Day (CMD) 2025.

Shell plans to cut capital spending to $20–22 billion a year through 2028, revising down its earlier guidance of $22–25 billion for 2024 and 2025. In addition, the company now targets a total of $5–7 billion in structural cost reductions by the end of 2028, up from its earlier $2–3 billion goal set for end-2024.

The world’s largest LNG trader said it expects combined upstream and integrated gas production to grow by 1% annually through 2030. LNG sales are projected to rise 4–5% per year over the same period. Liquids output will be maintained at 1.4 million barrels per day until the end of the decade.

The company also plans to allocate 10% of its capital to low-carbon businesses by 2030.

“We want to become the world’s leading integrated gas and LNG business and the most customer-focused energy marketer and trader, while sustaining a material level of liquids production,” said CEO Wael Sawan in a statement.

“Today we are raising the bar across our key financial targets, investing where we have competitive strengths and delivering more for our shareholders.”

Commenting on the announcement, Morgan Stanley (NYSE:MS) analysts said “the direction of travel is unchanged” for Shell.

“Focus on cost cutting and capital discipline continues with production slightly growing to 2030,” they noted.

Separately, Jefferies analysts said the press release “validates many of the market expectations” regarding the cash flow from operations (CFFO) distribution, cuts to capital and operating expenses, and the company’s focus on growth and portfolio strategy.

“The decision to maintain the focus of distributions on buybacks is consistent with management comments but will intensify the debate around the competitiveness of Shell's dividend yield,” they added.

Shell will hold its 2025 CMD presentation at 13 GMT.

This article first appeared in Investing.com