Shell plc (NYSE: SHEL) has unveiled its plans to increase dividends by 15%. Simultaneously, the company aims to ramp up natural gas production, signaling a renewed focus on fossil fuels under the leadership of new Chief Executive Officer Wael Sawan.
The move comes as part of the company’s strategic pivot. It aims to prioritize the most profitable segments of its business, even if they have high carbon emissions, while simultaneously scaling back less lucrative ventures. Although Shell has reiterated its commitment to achieving net-zero emissions by 2050, a concrete plan to reach this goal has yet to be presented.
Sawan stated, “We will invest in the models that work — those with the highest returns that play to our strengths.” Further details of the plan will be shared with shareholders during a presentation in New York later today.
Following a reduction in dividends during the height of the pandemic under former CEO Ben van Beurden, Shell has been steadily rebuilding them. Although the latest increase still leaves the payout approximately 30% lower than pre-Covid levels, it may help instill confidence in investors. This boost signifies the company’s ability to generate reliable cash flow and brings it closer to the performance of its esteemed American counterparts.
Looking ahead, Shell intends to expand its integrated gas business and stabilize oil output until 2030. The company has already made progress by reducing production by approximately 20% since its peak in 2019. This strategy mirrors BP Plc’s decision earlier this year to backtrack on plans to decrease oil production, which led to a 15% surge in BP’s share price, as investors rewarded the move.
In response to the news, Shell (SHEL) shares rose as much as 2.35% to $59.76 in the pre-market trading today.