Business

Shell cuts dividend for first time since Second World War

Published

4 years ago

April 30, 2020

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.

Source- CBC.ca

Source link

Business

Carry On Canadian Business. Carry On!

Published

20 hours ago

October 22, 2024

Steven Kaszab

Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.

I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.

Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.

Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.

Steven Kaszab
Bradford, Ontario
skaszab@yahoo.ca

Business

Imperial to cut prices in NWT community after low river prevented resupply by barges

Published

23 hours ago

October 22, 2024

Anne Joseph

NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.

Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.

The air transportation increase, it further states, will be implemented over a longer period.

It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.

Gasoline and heating fuel prices approached $5 a litre at the start of this month.

Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.

“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.

The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.

“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.

Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.

Additionally, she said the government has donated $150,000 to the Norman Wells food bank.

In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.

It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.

This report by The Canadian Press was first published Oct. 21, 2024.

Source link

Business

U.S. vote has Canadian business leaders worried about protectionist policies: KPMG

Published

23 hours ago

October 22, 2024

Anne Joseph

TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.

The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs

It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.

The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.

Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.

Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.

This report by The Canadian Press was first published Oct. 22, 2024.

Source link