Shell, the oil supermajor from the Netherlands, said on Friday it will pursue “at pace” a $7 billion buyback share program, largely funded by its shale business sale in the US. The strategy comes at the same time the company is facing liquified natural gas (LNG) outages and slower fuel sales due to the impact from Omicron.
Firstly, as we reported previously, Shell sold its shale Permian Basin assets to ConocoPhillips for $9.5 billion in cash, back in November 2021. The sale represented a major shift for the oil major, as it shifts focus to a clean energy transition.
Moreover, according to the company, the proceeds from the sale would finance the buyback shares program. It said it would return $7 billion of the proceeds to shareholders; on top of 20% to 30% of cashflow from operations.
“The remaining $5.5 billion of proceeds from the Permian divestment will be distributed in the form of share buybacks at pace,” it said.
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Shell to peak LNG volumes in 4Q, 2021
On the other hand, as outlined above, the strategy comes amid LNG outages, particularly in Australia; where its giant Prelude floating LNG vessel endured a power outage. As a result, the company’s shares were down 0.32% on Friday after a trading update ahead of its quarterly results on Feb. 3. This compared with a 0.12% rise in the broader European energy index.
Furthermore, the company said production and liquefaction volumes endured impact in the fourth quarter by unplanned maintenance. Consequently, for the current quarter, its LNG volumes would be between 7.7 and 8.3 million tons; well below a peak of 9.2 million tons in the fourth quarter of 2019.
However, for the final quarter of 2021 LNG levels will be “significantly higher” compared to the third quarter.
Finally, the company, which operates more than 45,000 petrol stations, said that earnings from its marketing division will be lower than the third quarter “the demand impact due to the Omicron virus and foreign exchange impacts in Turkey.”