Shell Shores Up Its Dividend

By Michael Amon Features Dow Jones Newswires

Royal Dutch Shell PLC said Tuesday it would begin paying its dividend only in cash, a fresh sign that big oil companies are trying to reward investors after struggling with three years of falling oil prices.

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Shell said it was scrapping a program that gave shareholders the option of receiving dividends in discounted stock, known as a scrip. It was a popular choice among bullish investors but one that agitated others who said it diluted the value of their shares.

The move is the latest evidence that big oil companies are recovering from a historic oil-market downturn and see oil prices stabilizing after years of volatility. Energy firms that once struggled to turn a profit with oil prices at $100 a barrel have been forced to drive down their costs to the point that they can generate enough cash to cover costs and hefty dividends at $60 or less.

Shell said it had shored up its dividend program because its free cash flow forecasts had risen to $25 to $30 billion by 2020 at Brent crude prices of $60 a barrel--$5 billion more than the company predicted in June 2016.

Norway's Statoil ASA announced its own plans to do away with its so-called scrip dividend program. Shell's British rival, BP PLC, is restarting a share buyback program in an effort to sweeten the pot for investors, and its board has discussed removing its own scrip program.

Shell said it was committed to launching its own buyback program soon.

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Shell, the world's second-largest Western oil company behind Exxon Mobil Corp., has been working to drive down costs and shore up its finances following its $50 billion deal to buy BG Group PLC in 2016. The merger gave Shell a globally dominant position in liquefied natural gas and prized oil fields in Brazil but also saddled it with the oil industry's highest debt load.

Shell said Tuesday it was on track to complete its goal of selling off $30 billion in assets by next year to bring down that debt. The company had completed $23 billion in sales, had $2 billion worth in announced deals and another $5 billion in deals that haven't been made public but are in "advanced progress," Shell said.

Shell also announced Tuesday that it planned to cut the carbon footprint of its energy products by 20% by 2035 and by half by 2050.

Write to Michael Amon at michael.amon@wsj.com

(END) Dow Jones Newswires

November 28, 2017 03:38 ET (08:38 GMT)