We haven’t cooled on the Arctic, says Shell as it rewards investors

  • @BawdenTom

Shell’s new chief executive, Ben van Beurden, pledged to persist with the oil giant’s Arctic operations, despite the problems it has faced in Alaska, as he promised to return around $30bn (£18bn) to investors over two years.

Mr van Beurden admitted there was still no indication of when the US Government will allow Shell to resume its pursuit of oil in Alaska following the grounding of its rig just off the coast 18 months ago.

However, he said the Arctic offered tremendous potential for oil exploration at a time of rising demand for energy and reiterated Shell’s commitment to the region, whether in Alaska or elsewhere. He was speaking as the company  announced that profits more than doubled in the second quarter on the back of rising production and prices, and committed to buy back $7bn to $8bn of shares this year and next.  Dividends will increase to account for around $22bn over the period, taking the total payout to shareholders to about $30bn.

The news was welcomed by investors, who sent Shell’s shares up by 66.5p to 2,555p.

“We will see a pretty significant increase in energy demand over the next few decades and it is inevitable that the world will have to tap into more oil and gas reserves. The Arctic is a huge area in terms of prospectivity and therefore in my mind there is no doubt that the Arctic will be explored... We will continue to look at opportunities,” said Mr van Beurden.

Excluding exceptional items, Shell’s second-quarter profits rose 33 per cent to $6.1bn, compared with the year before, as it suffered a $1.94bn impairment charge, – most of it related to its US shale gas assets.

Shell had signalled its intent to continue returning cash to investors but this is the first time it has put a figure on the amount. It increased its dividend for the second quarter by 4 per cent to $0.47 a share.

Mr van Beurden, who took over as chief executive in January, said Shell was already showing signs of improvement  under his watch and had “huge potential” for growth. “We are making progress with the priorities I set out at the start of 2014: to balance growth and returns by focusing on better financial performance, enhanced capital efficiency and continued strong project delivery,” he said. “Our financial performance for the second quarter of 2014 was more robust than year-ago levels but I want to see stronger, more competitive results right across the company.”

He is aiming to improve returns through selling assets and more selective project choices, after a rare profit warning issued in January.

Separately, Exxon Mobil of the US reported a 28 per cent jump in second-quarter profit to $8.78bn, as the company benefited from high prices for crude oil and natural gas.