Shell (SHEL) Focuses on Fossil Fuels, Expects to Raise Dividend
Shell plc (SHEL) expects to boost natural gas production and increase dividend by 15% under the leadership of new CEO Wael Sawan, who will refocus on fossil fuels that helped the company generate record profits last year.
It is a part of SHEL's growth strategy to focus on the most profitable parts of its business, even if they are carbon-intensive, while cutting back on ventures that don't provide enough profit. Despite the emphasis on gas and oil, the company reaffirmed its commitment to reach net-zero emissions by 2050. However, it did not divulge a detailed strategy for doing so.
Since former SHEL CEO Ben van Beurden reduced the dividend payout during the height of the pandemic, Shell has been steadily building it back. Although the recent rise will still leave the payout around 30% below the pre-Covid level, the initiative may make investors believe that the business can be a dependable source of cash, like its highly valued American competitors.
Following a 20% cut in production from a peak in 2019, Shell will now work to expand its integrated gas business and maintain oil output beyond 2030.
The company will lower capital spending to $22-$25 billion a year for 2024 and 2025, down from a projection of $23-$27 billion for 2023.
While several other details of the plan are yet to be revealed, the initial outline prioritizes oil and gas while giving low-carbon initiatives a mere supporting role.
Zacks Rank & Key Picks
Currently, Shell carries a Zack Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum Corporation EPM, Eni SpA E and RGC Resources Inc. RGCO. While Evolution Petroleum sports a Zacks Rank #1 (Strong Buy), both Eni SpA and RGC Resources carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is an independent energy company. It was formed to acquire and develop oil and gas fields and apply both conventional and specialized technology to accelerate production, particularly in low-permeability reservoirs. EPM has witnessed an upward earnings estimate revision for 2023 and 2024, in the past 30 days.
Eni SpA is a leading integrated energy major, which operates primarily through three business segments —Exploration & Production, Gas & Power, and Refining & Marketing and Chemicals. E has witnessed an upward earnings estimate revision for 2023 and 2024, in the past 30 days.
RGC Resources is a holding company that offers energy and associated products and services through its operational subsidiaries —Roanoke Gas Company and RGC Midstream, LLC. RGCO has thousands of customers through its natural gas distribution companies that serve the Roanoke Valley and Bluefield, Virginia and West Virginia areas.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Eni SpA (E) : Free Stock Analysis Report
Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
RGC Resources Inc. (RGCO) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
