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Shell warns weakening economy could slow buybacks

|About: Royal Dutch Shell plc (RDS.A)|By: , SA News Editor

Royal Dutch Shell (RDS.A, RDS.B) -3% pre-market and trades nearly 4% lower in London despite beating Q3 earnings estimates, as the company warns global economic conditions could slow the timetable for its $25B share buyback program.

“Prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback program within the 2020 time frame,” CEO Ben van Beurden says.

Gearing – the ratio between debt and market cap – rose in the quarter to 27.9% from 23.1% a year earlier.

But free cash flow, which enables the company to pay for dividends and share buybacks, rose to $10.1B from $8B a year ago.

Shell last year began the $25B buyback program that was promised after its 2016 acquisition of BG Group; the company so far has bought back $12B in shares, with another $2.8B planned for the next three-month period.

“The lack of a dividend hike at BP and Shell management hinting at a possibly slower pace of share buybacks are suggesting companies are taking a more sober view on the outlook for oil and gas prices,” Morgan Stanley analyst Martijn Rats says.

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