Shell can buy back 50% of its shares by 2030 or around £80bn-worth at the current price, analysts at Jefferies were predicting today.
“On our numbers, by 2030 Shell will be able to repurchase close to 50% of the shares outstanding, bring DPS (dividend per share) back to 94% of pre-2020 levels while reducing gearing to 6%.”
According to the US bank, “As Shell gets leaner it will be able to sustain sector-leading levels of shareholder distributions while continuing to deleverage.”
Organic growth will be supported by the continued development/ramp-up activity in Brazil and the Gulf of Mexico and an early start of Canada LNG, added the broker.
In addition, Shell has only just started targeting corporate costs/overheads and it has more divestments in the pipeline (Singapore, Nigeria).
Reserves ratios are also moving in the right direction and should improve further as gas reserves in Canada start to be booked.
Jefferies has increased its earnings forecasts for 2024-26 by 4% on average, operating cashflow by 2% and free cash flow by 6%.
Based on an oil price of US$80/85 a barrel for the next two years, Shell’s cash yield is higher than its European peers, the dividend yield is competitive while the buyback yield is sector-leading
Jefferies added that Shell is its top pick in the European integrated oil and gas with a price target of £30 and a 'buy' rating.
Shares today were up 0.6% at £24.86.