Shell announces commencement of a share buyback programme

Rhea-AI Summary

Shell plc has announced the commencement of a $3.5 billion share buyback programme set to run for approximately three months. The programme aims to reduce the company's issued share capital, with all repurchased shares to be cancelled. Subject to market conditions, Shell intends to complete the buyback before its Q3 2024 results announcement on October 31, 2024.

The company has entered into arrangements with a single broker for two contracts: one for London market exchanges ($1.75 billion) and another for Netherlands exchanges ($1.75 billion). The maximum number of ordinary shares that may be purchased under the programme is 644,200,000. The buyback will be conducted in accordance with relevant regulations and shareholder authorities granted at Shell's 2024 Annual General Meeting.

Positive

• Substantial $3.5 billion share buyback programme initiated
• Potential increase in shareholder value through reduction of issued share capital
• Equal distribution of buyback between London and Netherlands exchanges ($1.75 billion each)
• Programme completion planned before Q3 2024 results, indicating confidence in near-term financial position

Negative

• Large capital outlay of $3.5 billion may impact cash reserves
• Buyback to 644,200,000 shares, potentially limiting its impact on share price
• Programme subject to market conditions, introducing uncertainty in completion timeline

Insights

Financial Analyst

Shell's announcement of a $3.5 billion share buyback programme is a significant move that signals confidence in the company's financial position and future prospects. This programme, set to be completed within three months, represents a substantial commitment to returning value to shareholders.

Key points to consider:

• Scale and Timing: The $3.5 billion buyback is sizeable, especially given the short timeframe. This suggests Shell has strong cash flow and is prioritizing shareholder returns.
• Market Impact: The buyback is likely to provide support for Shell's share price in the short term, potentially reducing volatility.
• Capital Allocation: This move indicates Shell is balancing investments in future growth with immediate shareholder returns, which could be viewed positively by investors seeking both growth and income.
• Financial Flexibility: The ability to commit to such a large buyback suggests Shell has confidence in its financial position and future cash generation capabilities.

However, investors should also consider potential drawbacks:

• Opportunity Cost: Funds used for buybacks could potentially be invested in growth initiatives or debt reduction.
• Market Timing: The effectiveness of the buyback in terms of value creation depends on the share price during the repurchase period.

Overall, this buyback programme is likely to be viewed positively by the market, reflecting Shell's financial strength and commitment to shareholder returns.

Market Research Analyst

Shell's $3.5 billion share buyback programme is a strategic move that warrants closer examination in the context of the broader energy market and investor sentiment. Here are some key insights:

• Industry Trends: This buyback aligns with a broader trend in the energy sector, where many major oil and gas companies are increasing shareholder returns amid strong cash flows from higher energy prices.
• Investor Expectations: The programme may meet the demands of investors who have been pressuring oil majors to return more cash, especially given the sector's cyclical nature and long-term uncertainties related to the energy transition.
• Market Perception: This move could be interpreted as a signal of management's confidence in Shell's valuation, potentially attracting value investors.
• Competitive Positioning: The buyback's size and timing may influence how Shell is perceived relative to its peers in terms of shareholder friendliness and financial strength.

However, it's important to consider potential market risks:

• Energy Price Volatility: The success of this programme could be influenced by fluctuations in oil and gas prices, which remain unpredictable.
• ESG Considerations: Some investors might question whether these funds could be better allocated towards accelerating Shell's transition to cleaner energy sources.

In conclusion, while the buyback is likely to be well-received by many investors, its long-term impact on Shell's market position and valuation will depend on broader energy market dynamics and the company's overall strategic execution.

Legal Expert

Shell's announcement of a $3.5 billion share buyback programme carries significant legal and regulatory implications that investors should be aware of:

• Regulatory Compliance: The programme is structured to comply with multiple regulatory frameworks, including the UK Listing Rules, EU Market Abuse Regulation (MAR) and their post-Brexit UK equivalents. This demonstrates Shell's commitment to operating within complex, multi-jurisdictional legal environments.
• Shareholder Authority: The buyback is executed under existing shareholder authorities granted at the 2024 Annual General Meeting, with a clear limit of 644,200,000 shares. This adherence to shareholder-approved limits reinforces corporate governance best practices.
• Market Integrity: By using irrevocable, non-discretionary contracts with an independent broker, Shell is taking steps to ensure market integrity and avoid potential allegations of market manipulation.
• Transparency: The detailed disclosure of the programme's parameters, including its duration and the split between London and Netherlands exchanges, demonstrates a high level of transparency, which is important for maintaining investor trust and regulatory compliance.

Key legal considerations for investors:

• Renewal of Authority: The current shareholder authority expires in August 2025 or at the 2025 AGM, whichever comes first. Investors should monitor whether this authority is renewed, as it could impact future buyback programmes.
• Regulatory Scrutiny: Given the size and visibility of this programme, it may attract regulatory attention. Any perceived non-compliance could have reputational and financial consequences.

Overall, the legal structure of this buyback programme appears robust, reflecting Shell's experience in navigating complex regulatory landscapes across multiple jurisdictions.

Shell plc

Shell announces commencement of a share buyback programme

August 1, 2024

Shell plc (the ‘Company’) today announces the commencement of a $3.5 billion share buyback programme covering an aggregate contract term of approximately three months (the ‘programme’). The purpose of the programme is to reduce the issued share capital of the Company. All shares repurchased as part of the programme will be cancelled. It is intended that, subject to market conditions, the programme will be completed prior to the Company’s Q3 2024 results announcement, scheduled for October 31, 2024.

The Company has entered into an arrangement with a single broker consisting of two irrevocable, non-discretionary contracts, to enable the purchase of ordinary shares on both London market exchanges (the London Stock Exchange and/or on BATS and/or on Chi-X) (pursuant to one ‘London contract’) and Netherlands exchanges (Euronext Amsterdam and/or on CBOE Europe DXE and/or on Turquoise Europe) (pursuant to one ‘Netherlands contract’) for a period up to and including October 25, 2024. The aggregate maximum consideration for the purchase of ordinary shares under the London contract is $1.75 billion and the maximum consideration for the purchase of ordinary shares under the Netherlands contract is $1.75 billion. Purchases under the London contract will be carried out in accordance with the Company’s authority¹ to repurchase shares on-market and will be effected within certain contractually agreed parameters. Purchases under the Netherlands contract will be carried out in accordance with the Company’s authority¹ to repurchase shares off-market pursuant to the off-market share buyback contract approved by its shareholders and the parameters set out therein.

The maximum number of ordinary shares which may be purchased or committed to be purchased by the Company under the programme (across both contracts) is 644,200,000, which is the maximum number remaining as of the date of this announcement pursuant to the relevant authorities granted by shareholders at the Company's 2024 Annual General Meeting¹.

The broker will make its trading decisions in relation to the Company's securities independently of the Company.

The programme will be conducted in accordance with Chapter 12 of the Listing Rules, Article 5 of the Market Abuse Regulation 596/2014/EU dealing with buy-back programmes (‘EU MAR’) and EU MAR as “onshored” into UK law from the end of the Brexit transition period (at 11:00 pm on 31 December 2020) through the European Union (Withdrawal) Act 2018 (as amended by the European Union (Withdrawal Agreement) Act 2020), and as amended, supplemented, restated, novated, substituted or replaced including by relevant statutory instruments (including, The Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310)), from time to time and the Commission Delegated Regulation (EU) 2016/1052 (the ‘EU MAR Delegated Regulation’) and the EU MAR Delegated Regulation as “onshored” into UK law from the end of the Brexit transition period (at 11:00 pm on 31 December 2020) through the European Union (Withdrawal) Act 2018 (as amended by the European Union (Withdrawal Agreement) Act 2020), and as amended, supplemented, restated, novated, substituted or replaced, including by relevant statutory instruments (including, The Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310)), from time to time.

¹ The existing shareholder authorities to buy back shares granted at the Company's 2024 Annual General Meeting will expire at the earlier of the close of business on August 20, 2025, and the end of the date of the Company's 2025 Annual General Meeting. The Company expects to seek renewal of shareholder authority to buy back shares at subsequent Annual General Meetings.

Enquiries

Media International: +44 (0) 207 934 5550

Media Americas: +1 832 337 4355

Cautionary Note

The companies in which Shell plc directly and indirectly owns investments are separate legal entities. In this announcement “Shell”, “Shell Group” and “Group” are sometimes used for convenience where references are made to Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this announcement refer to entities over which Shell plc either directly or indirectly has control. The term “joint venture”, “joint operations”, “joint arrangements”, and “associates” may also be used to refer to a commercial arrangement in which Shell has a direct or indirect ownership interest with one or more parties.  The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.

Forward-Looking Statements

This announcement contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”; “ambition”; ‘‘anticipate’’; ‘‘believe’’; “commit”; “commitment”; ‘‘could’’; ‘‘estimate’’; ‘‘expect’’; ‘‘goals’’; ‘‘intend’’; ‘‘may’’; “milestones”; ‘‘objectives’’; ‘‘outlook’’; ‘‘plan’’; ‘‘probably’’; ‘‘project’’; ‘‘risks’’; “schedule”; ‘‘seek’’; ‘‘should’’; ‘‘target’’; ‘‘will’’; “would” and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, judicial, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak, regional conflicts, such as the Russia-Ukraine war, and a significant cybersecurity breach; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Shell plc’s Form 20-F for the year ended December 31, 2023 (available at www.shell.com/investors/news-and-filings/sec-filings.html and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader.  Each forward-looking statement speaks only as of the date of this announcement, August 1, 2024. Neither Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.

Shell’s Net Carbon Intensity

Also, in this announcement we may refer to Shell’s “Net Carbon Intensity” (NCI), which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell’s NCI also includes the emissions associated with the production and use of energy products produced by others which Shell purchases for resale. Shell only controls its own emissions. The use of the terms Shell’s “Net Carbon Intensity” or NCI are for convenience only and not intended to suggest these emissions are those of Shell plc or its subsidiaries.

Shell’s net-zero emissions target

Shell’s operating plan, outlook and budgets are forecasted for a ten-year period and are updated every year. They reflect the current economic environment and what we can reasonably expect to see over the next ten years. Accordingly, they reflect our Scope 1, Scope 2 and NCI targets over the next ten years. However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target, as this target is currently outside our planning period. In the future, as society moves towards net-zero emissions, we expect Shell’s operating plans to reflect this movement. However, if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.

Forward-Looking non-GAAP measures

This announcement may contain certain forward-looking non-GAAP measures such as cash capital expenditure and divestments. We are unable to provide a reconciliation of these forward-looking non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile those non-GAAP measures to the most comparable GAAP financial measures is dependent on future events some of which are outside the control of Shell, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.

The contents of websites referred to in this announcement do not form part of this announcement.

We may have used certain terms, such as resources, in this announcement that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC.  Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.

LEI number of Shell plc: 21380068P1DRHMJ8KU70

Classification: Acquisition or disposal of the issuer’s own shares.

FAQ

What is the total value of Shell's (SHEL) share buyback programme announced on August 1, 2024?

Shell (SHEL) announced a $3.5 billion share buyback programme on August 1, 2024.

How long is Shell's (SHEL) share buyback programme expected to last?

Shell's (SHEL) share buyback programme is expected to last approximately three months, with intended completion before the Q3 2024 results announcement on October 31, 2024.

What is the maximum number of shares Shell (SHEL) can repurchase under this buyback programme?

Shell (SHEL) can repurchase a maximum of 644,200,000 ordinary shares under this buyback programme.

How is Shell's (SHEL) $3.5 billion buyback programme divided between exchanges?

Shell's (SHEL) buyback programme is equally divided with $1.75 billion allocated for London market exchanges and $1.75 billion for Netherlands exchanges.