Energy Voice | Improvement across the board expected at Shell as investors watch for buyback update

Energy giant Shell will report improvements “across multiple areas of the business” in its second quarter results announcement tomorrow, an analyst has said.

Biraj Borkhataria, of RBC Europe, said the firm’s first quarter results were “disappointing” in terms of cash flow generation.

But Mr Borkhataria said the metric should rise by about 25% quarter-on-quarter to $11.8 billion.

An increase of that magnitude would help Shell cover capital expenditure, the full dividend, and potential share buybacks.

Media reports have suggested that Shell could make an announcement on the launch of its eagerly-awaited £19bn share buyback plans tomorrow.

Mr Borkhataria believes Shell will set the ball rolling in “late summer”.

Shell said in November that it would cancel its scrip dividend programme from the fourth quarter of 2017, meaning future dividends would be paid out in cash.

Scrip dividends were employed when oil prices were low to give shareholders payments in shares instead of cash.

Shell chief financial officer Jessica Uhl previously said the buyback programme would start before the end of the decade.

Ms Uhl said Shell wanted to make more progress on its $30bn divestment programme, leading to further reductions in debt.

Mr Borkhataria said he expected a sizeable amount of divestments to be cashed in in the second quarter, possibly $4.6bn.

He added: “Shell remains one of our preferred Super-Majors, as we expect Shell’s FCF to grow above and beyond its dividend commitments over the next few years, with a significant portion of excess FCF being delivered to shareholders via share buybacks.

“We also remain positive on LNG over the next few years, where Shell is the market leader.”

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