Shell raises shareholder distributions and LNG sales target, trims spending

Shell on Tuesday pledged to return more cash to shareholders on the back of higher LNG sales, mainly via buybacks, trimmed its investments through 2028 and raised the prospect of selling or closing some chemicals assets.

The oil and gas major raised its shareholder distribution target to between 40% and 50% of cash flow from operations, from the current 30%-40%.

The world's biggest liquefied natural gas trader said it targeted a 4-5% annual increase in LNG sales over the next five years and 1% annual production growth.

Finance Chief Sinead Gorman said on a conference call that the LNG sales target would be underpinned by its own production and volumes from other producers. While Shell planned to keep oil production steady through to 2030, it wanted to sustain "material" oil output beyond 2030, she said.

Shell estimates global demand for liquefied natural gas to rise by around 60% by 2040, driven by economic growth in Asia, the impact of artificial intelligence and efforts to cut emissions in heavy industries and transportation.

The company produced 29 million metric tons of LNG and sold 66 million tons in 2024.

The group said in a statement on its capital markets day, it wanted to explore "strategic and partnership opportunities" in the United States for its chemicals assets and might close some businesses in Europe.

Shell trimmed its annual investment budget to a $20 billion to $22 billion range through 2028 from a previous $22 billion to $25 billion range after spending $21.1 billion last year.

It had spent around $8 billion by the end of last year out of a $10-15 billion investment budget on low-carbon solutions set for 2023 to 2025.

By the end of the decade, it would have up to 10% of its capital employed - which measures the sum of total equity and debt - in lower carbon platforms, it said. This metric currently stands at just under 10%, Gorman said.

Shell's renewables and energy solutions would receive $2-$3 billion a year of investments over the next three years, she said.

Shares were up around 2.2% at 1226 GMT, outperforming a 1.5% rise in a broader index of energy companies.

"The guidance looks better than expected, with higher cost reductions, capex guidance coming in lower at the midpoint versus consensus, and higher shareholder returns than anticipated," said RBC analyst Biraj Borkhataria, calling the update "boring but good".

Shell has a $3.5 billion share buyback plan in place for the current quarter, making this the 13th consecutive quarter of at least $3 billion of share repurchases.

When reporting full-year results in January, Shell hiked its dividend to around $0.36, in line with its 4% dividend growth policy which it confirmed on Tuesday.

Shell said in the update it aimed for annual free cash flow growth per share of more than 10% to 2030, while delivering between $5 billion and $7 billion in cumulative cost cuts between 2022 and the end of 2028.