Shell PLC's (LSE:SHEL, NYSE:SHEL) strategy update on Tuesday March 25 isn’t expected to bring any big surprises, but that’s not necessarily a bad thing.
RBC Capital sees the oil giant sticking to its current playbook of cutting costs, keeping capital spending in check, and focusing on its liquefied natural gas (LNG) business.
Investors have been wondering if Shell might shake things up—perhaps by selling off parts of its chemicals division—but RBC thinks that’s unlikely in the short term.
One area where Shell has made solid progress is cost-cutting. It previously aimed to save $2-$3 billion, and it has already hit that target. Now, expectations are that the company might push for even deeper reductions, potentially aiming for $4-$5 billion in total.
Meanwhile, Shell is set to lower its annual capital spending to around $20-$23 billion, which is a slight decrease from previous plans. However, its investments in green energy remain relatively modest, with the company prioritising returns over rapid expansion into renewables.
Shell’s LNG business continues to be the centrepiece of its long-term strategy. The company is expected to grow its LNG capacity in line with global demand, with key projects such as LNG Canada playing a big role.
RBC notes that while Shell has been cautious in its near-term forecasts, the actual results for 2025 could exceed expectations.
When it comes to shareholder returns, Shell isn’t expected to make drastic changes. The company has been consistent with its share buyback program and dividend policy, and RBC doesn’t see that shifting anytime soon.
Despite having room to increase dividends, Shell appears to prefer returning extra cash to investors through share repurchases.
The big question mark for Shell remains its oil and gas production beyond 2030. While the company has some growth projects lined up in the next few years, RBC points out that Shell may need to make acquisitions to sustain its production levels in the long run.
Investors will be watching closely to see how the company plans to address this.
Overall, RBC believes that while Shell’s strategy update might not be groundbreaking, the company’s focus on financial discipline and LNG growth should support its investment case.
The shares were up 0.8% at 2,697.5p.