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Shell to axe refining plants and focus on dividends and debt reduction

Shell to axe refining plants and focus on dividends and debt reduction

Philip Whiterow: 07:31 Thu 29 Oct 2020

Royal Dutch Shell PLC (LON:RDSB) has unveiled a huge restructuring of its refining and chemical operations as part of a strategic overhaul that places dividends at its centre.

The Anglo-Dutch giant said its fourteen refining sites will be reduced to six integrated chemical parks, with a switch in focus to performance chemicals and recycled feedstocks.

Shell’s marketing arm will also be strengthened with the development of the integrated power business and hydrogen and biofuels.

The six new chemical parks will be situated at Deer Park (US), Norco (US), Pernis (NL), Pulau Bukom (Singapore), Rheinland (Germany) and Scotford (Canada).

Shell made the announcement alongside third-quarter results to end September 2020 that showed a return to profit of US$489mln from losses in the previous three months but a 92% decline from the previous year.

Cashflow from operation also fell year-on-year to US$10.4bn (US$12.4bn) and chief executive Ben van Buerden said cash, debt reduction and dividends will be the focus going forward.

Shell increased the quarterly dividend this time by 4% to 16.65c and indicated this will be the rate of the increase going forward.

Van Buerden added the immediate target is to reduce net debt to US$65 bn from US$73.5bn at the end of September.

Once that target is achieved, Shell intends to distribute a total of 20-30% of cash flow from operations to shareholders through a combination of the progressive dividend and share buybacks, he said,

Any remaining cash will be allocated to disciplined and measured capex growth and further debt reduction.

Van Buerden said that the ambition is for Shell to become a net-zero emissions energy business by 2050 or sooner.

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