Royal Dutch Shell Plc is “puling out all the stops to safeguard” its dividend in a world where oil prices remain “lower for longer,” Chief Executive Officer Ben Van Beurden said. Europe’s biggest oil company is also protecting its plan to buy back shares, Van Beurden said in e-mailed comments before a speech at an industry conference in London on Tuesday. Shell is also keeping its “investment program steady for the future,” he said.
The halving of oil prices in the past year has forced Shell and its peers to cut costs, defer projects and hunker down for a prolonged period of low oil prices. Even with oil trading for about $50 a barrel, Shell’s Van Beurden and BP Plc boss Bob Dudley have made dividends their top priority.
Shell has weathered market ups and downs for seven decades — including oil at less than $10 in the 1980s and 1990s — without cutting dividends. The company is “geared to generate cash flow from operations and free cash flow in 2017 and beyond,” Van Beurden said. “So Shell is planning for a longer period of low prices.”
Shell’s debt-to-equity ratio gives it the flexibility to maintain dividend payouts even at lower oil prices, Van Beurden said. The Hague-based company expects to cut operating costs by about $4 billion, or 10 percent, this year and will reduce capital expenditure by 20 percent.
Oil’s collapse drove Shell’s annual dividend yield to 8.1 percent on Sept. 28, the highest in more than at least 20 years. The measure was at 7.2 percent on Monday compared with 4.1 percent for the benchmark FTSE 100 Index.