ii view: Shell makes history

Detailing more share buybacks and sat on a forecast dividend yield of over 3%. Buy, sell, or hold? 

Full-year results to 31 December

• Group revenue up 49% to $273 billion
• Profit attributable to shareholders of $20.1 billion from a prior year loss of $21.7 billion
• Fourth quarter dividend of 24 US cents per share
• Share buybacks of $3.5 billion announced in 2021.
• Net debt of $53 billion, down from $75 billion a year ago

Guidance:

• Expects to pay a first quarter dividend of 25 US cents per share, an increase of 4% on Q4 2021
• Planning a share buyback programme of $8.5 billion for the first half of 2022

Chief executive Ben van Beurden said:

"2021 was a momentous year for Shell. We launched our Powering Progress strategy and simplified our share structure and organisation. Progress made in 2021 will enable us to be bolder and move faster. We have a compelling strategy, with customers at its core. We have ambitious plans to generate shareholder value, to decarbonise our products and to provide energy to our customers while respecting nature.”

ii round-up:

Energy company Shell (LSE:SHEL) operates in over 70 countries and employs more than 80,000 people. 

Its Upstream division manages the exploration and extraction of crude oil, natural gas and natural gas liquids. The Downstream business serves more than 30 million customers at around 46,000 retail service stations every day.

The Integrated Gas division manages its liquefied natural gas (LNG) activities and the production of gas-to-liquid (GTL) fuels.

Its Renewables and Energy Solutions business is focused on power from renewable and low-carbon sources such as wind, solar, hydrogen and natural gas. 

For a round-up of these latest results, please click here.

ii view:

During 2021, Shell both aligned its tax residence with its country of incorporation in the UK and established a single line of shares. This brings it in line with other companies and its management believes, will strengthen its competitiveness, and accelerate both shareholder distributions and delivery of its strategy to become a net-zero emissions energy business. Its name has changed to Shell plc from Royal Dutch Shell. The year 2021 also saw US activist investor Third Point throw open the debate as to whether oil and renewables can sit comfortably together, calling for Shell to be broken up, something which Shell rejected.

For investors, both pandemic and economic outlook uncertainty are being faced. The dividend, having previously been cut for the first time since the Second World War, is not what it once was. And concerns regarding fossil fuels and climate change now ask questions of investors under Environmental, Social, and Governance (ESG) policies operated by many institutional investors. 

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That said, a major gain in oil and gas prices since pandemic lows in 2020 has boosted cash flows and allowed Shell to reduce debt. The same recovery and asset sales has also allowed management to refocus on shareholder returns. A further $8 billion of share buybacks are now planned, while the historic and forecast dividend yield both sit at over 3%; not bad in an era of ultra-low interest rates. In all, and with the consensus analyst estimate of fair value still sat at just over £21 per share, the shares look to remain deserving of ongoing long-term investor support.

Positives: 

• Geographically diverse operations
• A focus on shareholder returns

Negatives:

• High competition for renewable energy assets
• The weather can raise operational challenges

The average rating of stock market analysts:

Strong buy