Royal Dutch Shell will return to paying pure cash dividends and step up its investment in cleaner energy as it turns a corner after more than two years of cost cuts and disposals prompted by weak oil prices. Sonia Legg reports
Weak oil prices prompted an austerity drive at Royal Dutch Shell. But after more than two years of costs cuts and disposals the oil giant is turning a corner. It will abolish its scrip dividend - which allows investors to opt for payments in shares - and return to a pure cash dividend while still stepping up investment in cleaner energy. The news sent Shell shares up almost three per cent. (SOUNDBITE) (English): KEN ODELUGA, MARKET ANALYST, CITY INDEX, SAYING: "They've clearly done their sums and they can certainly see that even if the oil price should fall back by five dollars or so, judging by the break-even announcements we've had from the oil companies over the last few months, they should be able to maintain dividends at the current levels probably slightly higher." Shell also raised its cash flow outlook to $30 billion from $25 billion by 2020, assuming an oil price of $60 a barrel. But its new look operations can make a profit from oil at $50 dollars. (SOUNDBITE) (English): KEN ODELUGA, MARKET ANALYST, CITY INDEX, SAYING: "We are in a more balanced situation. I think it still remains fragile. I don't think any of the major oil executives that you speak to will be so confident as to state outright that we've got a situation where oil prices cannot become unstable again. They certainly can. I think we've certainly passed them the depths of the crisis that we saw the beginning of 2016 and the middle of 2015." The latest move follows a similar announcement by BP last month. But both know there are still plenty of challenges ahead. OPEC is heading for tougher-than-expected policy talks this week. There are worries its efforts to rebalance the market may create a global deficit and spur a price rally. That's let doubts creep in about the certainty of an extension to the current output deal.