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Royal Dutch Shell to boost investor appeal with US$25bn share buyback

“Today we are taking another important step towards the delivery of our world-class investment case, with the launch of a US$25bn share buyback programme."

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It starts with US$2bn worth of buybacks in the first three months

Royal Dutch Shell Plc (LON:RDSB) has decided to launch a US$25bn share buy-back programme, earlier than most analyst has anticipated.

The programme will run through 2018 to 2020, it will effectively reduce the oil major’s equity in issue by around 10%, and follows an extended period in which low crude prices meant dividends were paid in shares.

READ: Shell shareholders are enjoying an oil price sweet-spot

It kicks off with a maximum commitment to repurchase US$2bn of shares in the first three months.

“Today we are taking another important step towards the delivery of our world-class investment case, with the launch of a $25 billion share buyback programme,” said Ben van Beurden, Shell chief executive.

“This move complements the progress we have made since the completion of the BG acquisition in 2016, to reshape our portfolio through a US$30 billion divestment programme and new projects, to reduce net debt, and to turn off the scrip dividend.”

Financial performance remained strong in second quarter

It comes as Shell reported the current cost of Supply (CCS) earnings attributable to shareholders – its preferred metric for the bottom line - had increased during the second quarter. The figure, excluding certain items, amounted to US$4.69bn up 30% from the US$3.6bn seen in the first quarter.

Income attributable to shareholders was reported at US$6.02bn, up 290% from US$1.54bn in the first quarter and also marks an improvement year-on-year compared with the US$5.89bn generated in the same quarter of 2018.

All together for the first half CCS earnings excluding identified items came in at US$10.33bn, versus US$7.57bn in the first six months of last year, meanwhile, income attributable to shareholders more than doubled to US$11.92bn compared with US$5.08bn.

Free cash flow was reported at a healthy US$14.7bn for the first six months of 2018, albeit it was lower than last year’s first half in which it saw US$17.34bn.

Shell maintained its second-quarter dividend at 47 cents per share, similarly, the total payout for the first half stayed at 94 cents. The oil major highlighted that it is paying a total of US$3.9bn of dividends for the quarter.

Ben van Beurden added: “Our financial framework remains unchanged.

“Our free cash flow outlook and the progress we have made to strengthen our balance sheet give us the confidence to start our share buyback programme.”

Quick facts: Royal Dutch Shell PLC

Price: 1284.4 GBX

Market: LSE
Market Cap: £100.18 billion

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