Shell SHEL 0.98%
Chairman Andrew Mackenzie pledged in December that unifying his UK corporate identity “would enable accelerated distributions to shareholders and accelerate Shell’s transition to a net-zero emissions energy business”. Less than a week after going all-British, the company has given financial investors what they were promised, but environmentally focused investors don’t have that chance yet.
The energy giant reported an extremely profitable year on Thursday, generating $19 billion in adjusted earnings and $45 billion in cash flow from operations. Returns were boosted by rising oil and gas prices in a tight market. The company said it would increase its dividend and repurchase $8.5 billion of its stock by summer, in part through the sale of its assets in the Permian Basin. The stock rose slightly at the start of European trading.
Shell is one of the world’s few oil and gas producers and also an industry leader in planning the shift to cleaner energy. At the height of the pandemic, it hit investors with an unexpected dividend cut for the first time since World War II. Since the recovery in oil and gas prices, management has worked to restore confidence with its financially minded investors. The generous returns promised this quarter should enable Mr. Mackenzie’s promise to be delivered quickly.
There seems to be less action on the president’s commitment to accelerating the energy giant’s transition. Some progress has been made, including new partnerships to drive decarbonisation, deals with renewable energy companies and a successful bid for five gigawatts of floating wind power in Scottish waters. However, Shell’s capital spending plans for 2022 remain unchanged, with just $3 billion of its $23 billion budget going to its clean energy unit.
This could add to existing concerns among sustainability-focused investors over Shell’s decision to appeal a Dutch court ruling that required it to cut emissions. The energy company has promised to make the necessary cuts anyway, but its appeal could overturn the court’s decision, undermining a precedent that is being used to try to force peers and industrial customers to take similar action.
Shell’s number of environmentally conscious shareholders is unclear, but its results have attracted little other shareholders. With so much cash in hand, there is strong pressure to spend more on building trust with own investors as well.
Write to Rochelle Toplensky at firstname.lastname@example.org
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Appeared in the February 4, 2022 print edition.