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Abu Dhabi, UAEThursday 15 November 2018

Shell opens $25bn share buyback as profit rises

Repurchase programme a sign oil company has recovered from three-year downturn in the energy sector

A Shell petrol station in Rotterdam, Netherlands. Despite earnings boost, result fell short of estimates. Bloomberg
A Shell petrol station in Rotterdam, Netherlands. Despite earnings boost, result fell short of estimates. Bloomberg

Royal Dutch Shell launched a long-anticipated $25 billion share buyback programme on Thursday as its debt eased while second quarter profits came in below forecasts.

The share repurchase programme, promised following the $54bn acquisition of BG Group in 2016, is the clearest signal yet that the world's second-largest oil company has recovered from a bruising three-year downturn in the energy sector.

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

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Shell will start buying up to $2bn of A or B shares every three months, it said. It plans to repurchase at least $25bn in the period 2018-2020, subject to further progress with debt reduction and oil price conditions, it said.

"This move complements the progress we have made since the completion of the BG acquisition in 2016, to reshape our portfolio through a $30bn divestment programme and new projects, to reduce net debt, and to turn off the scrip dividend." Shell's net income attributable to shareholders in the quarter, based on a current cost of supplies (CCS) and excluding identified items, rose 30 per cent to $4.69bn from a year ago. That compared with a company-provided analysts' consensus of $5.96bn.

Oil and gas production in the quarter declined to 3.442 million barrels of oil equivalent (boed) from 3.839 million boed in the first quarter of 2018.

Shell's debt ratio versus company capitalisation, known as gearing, declined to 23.6 per cent from a peak of 29.2 per cent in the third quarter of 2016. Shell's debt pile reached $66bn.