Shell annual organic free cash flow outlook increased to $25B-$30B by 2020
Royal Dutch Shell (RDS.a) CEO Ben van Beurden updated investors on the company’s strategy, setting out plans to grow returns and free cash flow, and outlining its ambition to reduce the net carbon footprint of its energy products.
Van Beurden highlighted three updates from his presentation:
“We have increased our outlook for organic free cash flow, which has been consistently strong over the past five quarters. We have also made significant progress with our divestment programme, allowing us to reduce net debt in that time.
Meanwhile, we intend to cancel our scrip dividend programme with effect from the fourth quarter 2017.”
The outlook for annual organic free cash flow has increased to $25 to $30 billion by 2020 at a Brent crude oil price of $60 per barrel (real terms 2016).
This is $5 billion more than the outlook Shell provided during its capital markets day in June 2016.
The delivery of new projects continues, and the company remains on track to deliver 1 million barrels of oil equivalent per day, and $10 billion of cash flow from operations from new projects by 2018, at $60 per barrel, real terms 2016.
It expects to deliver an incremental $5 billion cash flow from operations by 2020. Annual capital investment will continue to be between $25 and $30 billion, and at current oil prices capital investment will be managed towards the bottom end of that range, or lower if needed.
Annual underlying operational expenditure will remain below $38 billion until 2020, with efficiency gains expected to deliver further reductions, building on the more than 20% reduction in operational expenditure since 2014. The company expects to continue to grow organic free cash flow throughout the 2020s at a more moderate rate.
Increased distributions to shareholders in the form of share buybacks in line with the plans confirmed below is expected to support a stronger growth in its metrics per share.
RDS-a closed at $61.85.
To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.