Shell Cuts Dividend for First Time Since World War II--Update

By Sarah McFarlane 

LONDON -- Royal Dutch Shell PLC cut its dividend for the first time since World War II after first-quarter profits fell by nearly half as the coronavirus pandemic hit.

Energy demand and oil prices have plunged in recent months as nationwide lockdowns restrict travel and hit economic growth. With some countries tentatively reopening their economies, Shell and its peers are bracing for the uncertain trading conditions to continue.

Shell cut its first-quarter dividend by 66% to 16 cents a share, its first cut since 1945.

"Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell," said Chief Executive Ben van Beurden.

Shell's move was in contrast to BP PLC, which said it would maintain its dividend.

"The move will allow Shell to pivot more easily through the energy transition, and not to be tied to a $15 billion dividend to service each year," said Biraj Borkhataria, co-head of European energy research at RBC Capital Markets.

The Anglo-Dutch oil giant reported a profit on a net current cost-of-supplies basis -- a figure similar to the net income that U.S. oil companies report -- for the three months ended Mar. 31 of $2.76 billion, compared with $5.29 billion in the same period a year ago.

In March, Shell cut its investment plan to $20 billion for 2020, from the previously budgeted $25 billion, and halted its share buyback program.

Shell joined BP in signaling lower refining margins and refinery capacity usage for the second quarter. It expects oil and gas production to fall in the coming quarter due to the pandemic, along with its oil product sales. The company said that falling demand, regulatory requirements or constraints on infrastructure could see further cuts to oil and gas production.

Major oil companies are in discussions with governments adhering to cuts led by The Organization of the Petroleum Exporting Countries which may require companies to lower their output from local operations.

Shell's gearing level -- its net debt as a percentage of total capital -- remained at around 29%, in line with the fourth quarter, but above the company's target of 25%.

Write to Sarah McFarlane at [e-mail]

(END) Dow Jones Newswires

April 30, 2020 04:45 ET (08:45 GMT)

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