Shell chief executive foresees brighter future despite current challenges

Shell Chief Executive Officer, Ben van Beurden, has provided an update on the company’s strategy, that sets a clear course for stronger returns and free cash flow.

Setting his remarks in the context of a volatile industry backdrop, van Beurden said: “I see important opportunities for Shell from the substantial and lasting changes underway in the energy sector.

We expect to see robust demand for oil and gas for decades to come, in a global energy system in a long-term transition to lower carbon fuels. As well as low oil prices today, we are seeing higher levels of price volatility, due to geopolitical change, the speed of information flows, and the pace of innovation in our sector.

By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, we can reshape Shell into a more focussed and more resilient company, with better returns and growing free cash flow per share.

All of this is underpinned by an unrelenting focus on safe and environmentally-responsible operational performance, high quality and commercial project execution and prudent financial management of the company.”

Turning to the recent acquisition of BG, van Beurden said: “The BG deal is an opportunity to accelerate the re-shaping of Shell.  Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate.”

“We are announcing an increase in expected deal-related synergies, from the $3.5 billion set out in the prospectus, to $4.5 billion on a pre-tax basis in 2018, an increase of some 30%. We expect to achieve and exceed the $3.5 billion synergies prospectus commitment earlier than expected, in 2017, when synergies should be $4 billion. Our other deal-related financial commitments to shareholders in the form of asset sales, debt reduction, and dividends, followed by share buy-backs, are unchanged”.

Van Beurden added: “With our continued strong focus on returns and growth in free cash flow per share I want to create a world-class investment case for Shell shareholders.”

Van Beurden went on to set out Shell’s portfolio priorities, which have been revised to drive an improvement in returns and free cash flow. Van Beurden defined three categories that play out across different time scales.