These extraordinary developments are in line with the dynamics we described in Shell plc: Farewell to political correctness. Judging by the share price, which has dropped by more than a third in just a few days, they have hardly been enough to impress the market.
The figures are nonetheless breathtaking. In 2024, Shell will return $23bn to its shareholders in dividends and share buy-backs. For the third year running, this was more than the company invested in capital development.
In three years, more than $73bn has been distributed to shareholders - the sequence certainly includes an exceptional 2022 episode, marked by very high oil and gas prices. This amount should be compared with the company's current market capitalization of $182bn.
Under the leadership of CEO Wael Sawan, Shell, which produces almost two million barrels of oil equivalent per day, is thus fully assuming its strategic pivot: major growth ambitions are being abandoned, in favor of a clear focus on shareholder remuneration instead.
In this context, the fall in crude oil prices is a double-edged sword. On the one hand, it has had a negative impact on cash flow, but on the other, it has enabled share buy-backs to be accelerated at attractive valuations.
It will take more for the British major to close the valuation gap with an American peer like Exxon, able to ensure both production expansion and huge returns of capital to shareholders. See Exxon Mobil Corporation: Babylonian Prospects.
However, Shell remains better regarded by investors than its peer BP. Targeted by the dreaded Elliott activists and still entangled in questionable strategic choices, the other British major also stands out for its lavish returns of capital to shareholders.
Over the last three years, the amounts returned in dividends and share buy-backs represent over half of its current market capitalization. See Hope on the horizon for BP.
