Shell Cuts Dividend By 65% On ‘Prolonged’ Oil Market Uncertainty

Royal Dutch Shell (LON:RDSB) has cut its dividend for the first time since the Second World War on the “prolonged” oil market uncertainty created by the global coronavirus or covid-19 pandemic.

Publishing its financials on Thursday (April 30), the Anglo Dutch oil major said its adjusted net income came in at $2.86 billion in the first quarter, down 46% on an annualized basis from $5.29 billion posted in the same quarter last year.

Shell Chairman Chad Holliday said: “Given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the board believes that maintaining the current level of shareholder distributions is not prudent.”

As a result, dividend payout level for the first quarter was reset at $o.16 per share, down 65% from $0.47 per share previously. It comes as a blow for investors as Shell was the biggest dividend payer in the FTSE 100 in 2019. Rival BP maintained its dividend payout on Tuesday, while ExxonMobil maintained its payout on Wednesday in trying times for the industry.

Shell reported weakness in earnings across its energy holdings with lower realized prices for oil, gas, and liquefied natural gas (LNG), along with weaker margins in its refining and chemicals businesses. Headline sales volumes overall were also lower.

Before the extent of the coronavirus pandemic had become clear, Shell said in January that it had slowed the pace of its share buyback program and was unlikely to hit its $25 billion target this year. Subsequently, in March, the oil major announced the cancellation of the next tranche of purchases.

Ben van Beurden, Chief Executive of Shell noted: “In March, we took decisive actions to reduce our spending, increase our liquidity and position our business to manage the deteriorating macroeconomic and commodity price outlook.

“Our integrated business model, the high quality of our assets and the resourcefulness of our people have allowed us to respond swiftly.”

He added that given the “continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty”, the company is taking further prudent steps to bolster its market resilience, underpin the strength of it balance sheet and “support the long-term value creation of Shell.”