Fuel prices are displayed outside a Shell gas station.
Photo: jim lo scalzo/Shutterstock
Shell SHEL 1.43% Chairman Andrew Mackenzie promised in December that unifying its corporate identity in the U.K. would “allow for an acceleration in shareholder distributions and speed up Shell’s transition to a net-zero emissions energy business.” Within a week of becoming fully British, the company has given financial investors what they were promised, but any green-focused investors aren’t yet so fortunate.
The energy giant on Thursday reported a tremendously profitable year, generating $19 billion in adjusted earnings and $45 billion in cash flow from its operations. Returns were buoyed by higher oil and gas prices in a tight market. The company said it would increase its dividend and buy back $8.5 billion of its shares by the summer, boosted partly by the sale of its assets in the Permian basin. The stock rose modestly in early European trading.
Shell is one of a handful of global oil and gas producers and also a sector leader in planning to shift to cleaner energy. During the depths of the pandemic, it hit investors with an unexpected dividend cut for the first time since World War II. Since oil and gas prices recovered, management has been working to rebuild trust with its financially-minded investors. The generous returns promised this quarter should help by quickly delivering on Mr. Mackenzie’s promise.
There seems to be less action on the chairman’s commitment to speed up the energy giant’s transition. Some progress has been made, including new partnerships to drive decarbonization, deals with renewable companies and a successful bid for five gigawatts of floating wind power in Scottish waters. However, Shell’s 2022 capital spending plans remain unchanged, with only $3 billion of its $23 billion budget going to its clean-energy unit.
This may add to existing concerns among sustainability-focused investors about Shell’s move to appeal a Dutch court judgment that required it to reduce its emissions. The energy company has promised to make the required cuts anyway, but its appeal could overturn the court’s decision, undermining a precedent that is being used to try to force peers and industrial customers to take similar action.
It is unclear how many green-minded shareholders Shell has, but there was little in its results to attract others. With so much cash in hand, the pressure is on for it to spend more on building trust with clean investors too.
Write to Rochelle Toplensky at [email protected]
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