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Shell cuts dividend for first time since Second World War – CBC.ca

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Royal Dutch Shell cut its dividend for the first time since the Second World War on Thursday, in a drastic step to preserve cash as it prepares for a protracted slump in demand for oil because of the coronavirus pandemic.

The Anglo-Dutch energy company also suspended share buybacks and said it would reduce oil and gas output by about a quarter after its net profit almost halved in the first three months of 2020 to $2.9 billion US.

The new measures combined with cuts in capital spending and planned cost reductions announced last month could save Shell almost $30 billion this year to help it weather the crisis and prepare for the transition to low-carbon energy.

“We are living through a crisis of uncertainty,” CEO Ben van Beurden said. “If we had not cut the dividend … we would have been left without options to reposition the company for the recovery and the future.”

Shares in Shell had slumped 8.2 per cent in London, underperforming rival BP,which said on Tuesday it was maintaining its first-quarter dividend.

Dividend slashed to 16 cents

For years, Shell has taken pride in having never cut its dividend since the 1940s, resisting such a move even during the deep downturns in the oil market of the 1980s.

Some investors had called on major oil firms to break the industry taboo around dividends because of the fallout from the health crisis, rather than taking on more debt to maintain payouts.

Shell said it would reduce its quarterly dividend to 16 cents per share from 47 cents, which would save the company about $10 billion this year if it stays at that level. Shell last changed its dividend at the start of 2014, raising it from 45 cents.

Shell is the first of the five so-called Oil Majors to cut its dividend because of the coronavirus crisis. Besides BP, Exxon Mobil has also said it will maintain its first-quarter dividend while Total and Chevron have yet to report first-quarter results.

“Shell’s dividend cut has thrown down the gauntlet to the supermajors. BP, Chevron, ExxonMobil and Total are due to pay out $41 billion of dividends in 2020,” said Tom Ellacott, an analyst at Wood Mackenzie.

‘Ripping off the Band-Aid’

Van Beurden said the dividend cut was part of a long-term resetting of the company that would also play a core part in Shell’s shift away from fossil fuels.

Oil and gas companies have come under increasing pressure from investors worried about climate change and Shell this month laid out the sector’s most extensive strategy yet to reduce greenhouse gas emissions to net zero by 2050.

“Ripping off the Band-Aid always hurts, but if Royal Dutch Shell’s move today allows more room for alternative energy investments, and facilitates a lower cost of equity, it could be just what the company needs to ensure its long-term health,” said Tal Lomnitzer, a senior investment manager at Janus Henderson Investors.

Wood Mackenzie said the cut meant Shell would be able to generate cash with oil at $36 a barrel, down from $51 previously. Brent crude has fallen 65 per cent so far this year and was trading at about $25 a barrel on Thursday.

Shell has cut its dividend for the first time since the Second World War. (Reuters)

Shell paid about $15 billion in dividends last year, making it the world’s biggest payer of dividends after Saudi Arabia’s national oil company, Saudi Aramco. Dividends paid by Shell and BP last year make up almost one quarter of all the dividend income paid out by companies on London’s benchmark stock index, the FTSE 100.

Global recession

Following years of deep cost cuts after its acquisition of BG Group for $53 billion in 2016, Shell had previously planned to boost payouts through dividends and share buybacks to $125 billion between 2021 and 2025.

Global energy demand could slump by six per cent in 2020 due to coronavirus lockdowns and travel restrictions in what would be the largest contraction in absolute terms on record, the International Energy Agency (IEA) said on Thursday.

Shell last month said it would reduce capital expenditure this year to $20 billion US at most from a planned level of about $25 billion US and cut an additional $3 billion to $4 billion off operating costs over the next 12 months.

Van Beurden said he expected the impact of the drop in oil demand to be more severe in the second quarter, while chief financial officer Jessica Uhl said the company was bracing for a deeper and longer recession that would extend into 2023.

Shell’s first-quarter net income attributable to shareholders based on a current cost of supplies and excluding identified items fell 46 per cent from a year earlier to $2.9 billion, above the consensus in an analyst survey provided by Shell.

The company said it cut activity at its refining business by up to 40 per cent and expected to cut oil and gas production in the second quarter to between 1.75 million and 2.25 million barrels of oil equivalent per day (boed) from 2.7 million boed in the first quarter. Shell said it did not expect the cuts to be permanent and it would still invest in oil and gas projects.

Shell, the world’s largest fuel retailer with 45,000 filling stations, said its fuel sales could fall up to 54 per cent in the second quarter.

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Bell inks 5G equipment deal with Ericsson; leaves door open to Huawei – BNNBloomberg.ca

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MONTREAL – Huawei Technologies Inc.’s ambitions to be a player in Canada’s 5G network took a major hit Tuesday as two of the country’s three largest telecom companies announced partnerships with the Chinese tech giant’s European rivals.

Bell Canada announced Tuesday morning that Sweden-based Ericsson will be its second supplier of the radio access network equipment that has been Huawei’s main product line in Canada since entering the market in 2008. Earlier this year, Bell signed its first 5G wireless network supplier agreement with Nokia, a rival of Ericsson and China’s Huawei.

Later Tuesday, Telus Corp. announced that it had also selected Ericsson, as well of Nokia of Finland, as suppliers for its 5G networks.

Neither Bell nor Telus provided details on how much their contracts with Ericsson and Nokia were worth.

Huawei’s participation in the construction of Canada’s 5G network has become a major sticking point between Ottawa and Washington. The U.S. has warned Canada, the United Kingdom and other allies that it will limit intelligence sharing with countries that have Huawei equipment in their 5G networks – citing the potential for spying by China, an allegation Huawei denies.

“Huawei has worked closely with Bell in Canada for many years, helping them build one of the world’s leading 4G LTE networks,” Huawei Canada spokesman Alykhan Velshi said in a statement.

He added that Huawei’s remains committed to Canada and looks forward to the federal government completing its 5G review and its decision about Huawei’s role in Canada.

“We continue investing more than a quarter of a billion dollars a year in R&D in Canada. We continue building new research partnerships with Canada’s world-class universities. As we have for more than a decade, we continue to work with our Canadian telecom partners to help them build and support state-of-the-art networks that connect Canadians,” Velshi said.

Ericsson, already a supplier of 4G LTE wireless and other technology to Bell and the main supplier for its rival Rogers Communications, also has a major research and development presence in Montreal.

Bell said Ericsson will also support its rollout of 5G-enhanced fixed wireless home internet service to rural areas, which generally have less access to land-based fibre optics networks.

On Tuesday, Bell indicated the door remains open to partnering with Huawei, depending on the outcome of the federal government’s review.

“We’re working with multiple vendors to build our 5G network – as we did with our successful buildout of 4G LTE, which included Cisco, Ericsson, Huawei, Nokia and others,” said Bell spokesperson Marc Choma in an email to BNN Bloomberg. “Huawei has been a reliable and innovative partner in the past and we would consider working with them in 5G if the federal government allows their participation.”

A spokesperson for Telus did not respond to BNN Bloomberg’s question about whether it is also open to partnering with Huawei on its 5G network if permitted by the government.

Prior to the arrest of Huawei Technologies chief financial officer Meng Wanzhou in Vancouver in December 2018, the Chinese company wasn’t a household name in Canada.

Since Meng’s arrest, which has sparked a major rift between China and Canada and focused worldwide attention on Huawei, the federal government has been undecided about whether the Chinese company will be allowed in Canada’s 5G networks – which are currently being assembled.

Analysts have said Bell and Telus use Huawei extensively in their fourth-generation networks and would be more affected by a Huawei ban than their rival Rogers Communications, which has predominantly used Ericsson network gear.

Besides Huawei, Ericsson and Nokia, there are other companies that want a piece of the 5G network upgrades.

Samsung Electronics has announced a deal to supply equipment for Videotron’s wireless network in the province of Quebec and the Ottawa region of Ontario.

With files from BNN Bloomberg

BNN Bloomberg is a division of Bell Media, which is owned by BCE.

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Telus selects Nokia, Ericsson as 5G suppliers – Yahoo Canada Finance

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Toronto, Canada - June 16, 2019: TELUS Scarborough office building in Toronto, canada. Telus is a Canadian telecommunications company that provides telecommunications products and services.

Vancouver-based national carrier Telus has selected Nokia and Ericsson as its 5G vendors, a press release from the company said. 

The news comes the same day that Bell announced it too would use Ericsson to provide radio access network (RAN) equipment. 

“Our team is committed to rolling out superior network technology from urban to rural communities, fueling our economy and driving innovation as we power Canadians into the 5G era through an unparalleled network experience,” Telus’ CEO Darren Entwistle said in the release. 

“Our 5G deployment will support economic growth and diversity that will be essential for the virtualization of health, education, teleworking, and stimulating the economic growth and recovery given the impact of COVID-19.”

During its Q1 2020 earnings, CFO Doug French said its focus right now is to help its customers during the COVID-19 crisis.

In its Q4 2019 earnings, the carrier said it was not going to pre-announce its 5G launch plans but that its initial module, or the first phase of the 5G rollout, would be with Huawei until the government approves its RFP.

Bell and Telus use Huawei’s network equipment in some areas. The federal government is still reviewing whether or not it intends to ban the Chinese telecommunications manufacturer from participating in Canada’s 5G rollout.

Rogers also uses Ericsson as a 5G vendor.

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North American equity markets rally in spite of widespread unrest – BNNBloomberg.ca

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1:15 p.m. ET: North American equity markets extend gains into midday, oil rallies

North American equity markets were solidly in positive territory through the midday trade, with the S&P/TSX Composite Index up 0.9 per cent, the Dow Jones Industrial Average gaining 0.8 per cent, the S&P 500 rising 0.4 per cent and the Nasdaq Composite modestly higher, up 0.1 per cent.

U.S. benchmark oil West Texas Intermediate accelerated higher into the afternoon, rising more than three per cent to US$36.55 per barrel to trade at session highs.

That helped lift the TSX energy sector, which led the way on the composite with a 3.4-per-cent gain on the session.

The Canadian dollar continued to move higher against its U.S. counterpart, gaining a third of a cent to trade at 74.04 cents U.S., though the greenback has been broadly weaker against almost all of its major-market peers.

9:35 a.m. ET: North American equity markets rally in spite of widespread unrest

North American markets notched gains into the early trading day Tuesday, with the S&P/TSX Composite Index and Dow Jones Industrial Average both up half a per cent, the S&P 500 gaining a third of a per cent and the Nasdaq Composite Index up a more modest 0.1 per cent. The gains came in spite of widespread civil unrest in the United States, as some police responded with force to demonstrators protesting against systemic racial inequities.

In Toronto, shares of BlackBerry Ltd. rose about seven per cent to extend Monday’s gains after an unconfirmed report from StreetInsider said the company has held talks with Fairfax Financial over a deal for Fairfax to acquire the remainder of BlackBerry’s shares. In an email to BNN Bloomberg, BlackBerry declined to comment on rumours or speculation.

BlackBerry shares rise on takeover report

BlackBerry is a stock to watch after a report Monday suggesting Fairfax Financial was considering a takeover of BlackBerry sent the shares higher. BNN Bloomberg’s Paul Bagnell has more.

Crude oil prices were higher, with U.S. benchmark West Texas Intermediate up half a per cent to US$35.0 per barrel, though it had briefly breached the US$36 level earlier in the day. Crude has gotten a boost from the OPEC+ group’s production curtailments, and there are reports the group may extend those cuts for another month to support prices.

Alberta’s Western Canadian Select also gained, rising 1.55 per cent to US$29.51 per barrel.

The Canadian dollar extended Monday’s surge against its U.S. counterpart, gaining another two-tenths of a cent to 73.90 cents U.S.

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