Shell says higher oil prices reduce debt pile

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Royal Dutch Shell said higher oil prices had helped the energy major cut its debt pile, paving the way for higher shareholder returns in the second quarter.

In a trading statement on Wednesday ahead of results due at the end of the month, the Anglo-Dutch company said it would increase payouts to investors — to between 20 and 30 per cent of cash flow from operations — through either buybacks or dividends.

Shares in Shell rose 2.75 per cent in early London trading.

Shell did not provide guidance as to which form distributions would take, but said it was motivated by “strong operational and financial delivery, combined with an improved macroeconomic outlook”.

The company had already said that once net debt shrunk to below $65bn it would lift returns. On Wednesday, Shell did not specifically say it had hit this target, but said it would now “retire” this benchmark, which is quicker than analysts had expected.

“In the second quarter, Shell expects to have further reduced its net debt,” it added.

Despite Shell being keen to disclose its capital discipline and improved cash position, it noted several weaker aspects of its business.

It said trading of liquefied natural gas was “significantly below average” while oil products sales were well below levels before the coronavirus crisis.

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