Shell Dividend Cut Dubbed Sensible
Shell’s move to cut its dividend by 66 percent has been described by Wood Mackenzie’s Tom Ellacott as a “sensible and prudent action to preserve cash in the face of huge macro uncertainty”.
“We estimate the cut reduces Shell's cash flow 2020 cash flow breakeven from $51 per barrel to $36 per barrel,” Ellacott, Wood Mackenzie’s corporate analysis team senior vice president, said in a statement sent to Rigzone.
“Shell’s dividend cut has thrown down the gauntlet to the supermajors. BP, Chevron, ExxonMobil and Total are due to pay out $41 billion of dividends in 2020. Combined pay-outs would fall by $27 billion of they all cut by 66%,” he added.
Wood Mackenzie outlined that Shell’s annual pay out will fall from $14.9 billion to $5.1 billion, freeing up $10 billion of capital. The last time one of the supermajors cut dividend was BP, in the immediate aftermath of the Macondo disaster, Wood Mackenzie highlighted.
Shell revealed Thursday that it had cut its dividend from $0.47 to $0.16. In a statement posted on its website, the company said it has taken decisive actions to reduce its spending and position its businesses to compete in the current lower commodity price environment and uncertain demand outlook.
“The board of Royal Dutch Shell has taken the decision to reset its dividend to provide financial resilience and further flexibility to manage the uncertainty,” Shell said in a company statement.
“Shell is taking the steps necessary to ensure that we are well-positioned for the eventual economic recovery,” Shell added.
Shell registered CCS earnings attributable to shareholders, excluding identified items, of $2.9 billion in the first quarter of this year, which marked a 46 percent drop compared to the same period last year. This reflected lower realized oil, gas and LNG prices, weaker realized refining and chemicals margins as well as lower sales volumes, compared with the first quarter of 2019, Shell outlined.
Total dividends distributed to shareholders in the quarter were $3.5 billion, the company revealed.
To contact the author, email andreas.exarheas@rigzone.com
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