Shell announces commencement of a share buyback programme

Rhea-AI Summary

Shell plc has announced the commencement of a $3.5 billion share buyback program, aiming to reduce the issued share capital of the company. The program is expected to be completed before the Q1 2024 results announcement. The company has entered into an arrangement with a single broker for the purchase of ordinary shares on London and Netherlands exchanges. The maximum number of ordinary shares which may be purchased under the program is 480,000,000.

Insights

Financial Analyst

Shell's announcement of a $3.5 billion share buyback programme is a strategic financial maneuver with implications for shareholder value and market perception. Buybacks generally indicate a company's confidence in its financial stability and future prospects. By reducing the number of shares outstanding, buybacks can increase earnings per share (EPS), potentially leading to a higher stock price. However, the impact on the stock price also depends on market conditions and investor sentiment.

From a balance sheet perspective, the repurchase will utilize cash reserves or debt, which can affect the company's leverage ratio. The decision to allocate $3.5 billion towards buybacks rather than dividends or reinvestment in the business warrants scrutiny. Investors should assess whether this capital deployment aligns with the company's long-term strategic goals and operational needs.

Furthermore, the timing of the buyback, intended to be completed before the Q1 2024 results announcement, could be seen as a move to positively influence stock performance leading into the earnings release. Investors should monitor the program's progress and consider how it aligns with Shell's overall financial strategy and market conditions.

Market Research Analyst

Shell's engagement in a share buyback programme is a signal to the market, often interpreted as a bullish stance by the company on its own stock. The size and scope of the buyback, with a cap of 480 million ordinary shares, is substantial and reflects a significant commitment to returning value to shareholders.

It is important to consider the broader industry context, where energy companies may face volatility due to fluctuating commodity prices, regulatory changes and the transition to renewable energy sources. Shell's buyback decision might be influenced by these factors, as well as its operational performance and capital expenditure plans.

Investors and analysts should also evaluate the buyback in light of Shell's historical performance, industry trends and competitive positioning. The buyback's execution through both London and Netherlands exchanges suggests a strategic approach to capital management across different investor bases and regulatory environments.

Legal Expert

The share buyback programme is structured through irrevocable, non-discretionary contracts with a single broker, indicating a pre-planned and compliant approach under the relevant regulatory frameworks. Shell's adherence to Chapter 12 of the Listing Rules and the Market Abuse Regulation (EU MAR) demonstrates its commitment to transparency and regulatory compliance.

The legal framework governing the buyback, including the EU MAR as onshored into UK law, provides a structured process for the buyback that aims to prevent market manipulation and ensure fair trading practices. The legal intricacies of such programmes are crucial for maintaining investor confidence and market integrity.

Investors should be aware of the legal constraints and protections in place, such as the limitations on the number of shares that can be repurchased, which are dictated by shareholder authorities granted at the Annual General Meeting. These legal considerations play a fundamental role in the execution and potential success of the buyback programme.

Shell plc

Shell announces commencement of a share buyback programme

February 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 Q1 2024 results announcement, scheduled for May 2, 2024.

The Company has entered into an arrangement with a single broker consisting of three 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 two ‘London contracts’) 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 April 26, 2024. The aggregate maximum consideration for the purchase of ordinary shares under the London contracts is $2 billion and the maximum consideration for the purchase of ordinary shares under the Netherlands contract is $1.5 billion. Purchases under the London contracts 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 all three contracts) is 480,000,000, 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 2023 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 2023 Annual General Meeting will expire at the earlier of the close of business on August 22, 2024, and the end of the date of the Company's 2024 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 STATEMENT

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. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. “Joint ventures” and “joint operations” are collectively referred to as “joint arrangements”.  Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. 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’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, “milestones”, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ 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; 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, 2022 (available at www.shell.com/investor 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, February 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”, 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 only controls its own emissions. The use of the term Shell’s “Net Carbon Intensity” is 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 Net Carbon Intensity (NCI) targets over the next ten years.  However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCI target, as these targets are 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 purpose of Shell plc's $3.5 billion share buyback program?

The purpose of the program is to reduce the issued share capital of the company.

When is the expected completion date for Shell plc's share buyback program?

It is intended that, subject to market conditions, the program will be completed prior to the Company’s Q1 2024 results announcement, scheduled for May 2, 2024.

With whom has Shell plc entered into an arrangement for the purchase of ordinary shares?

The company has entered into an arrangement with a single broker for the purchase of ordinary shares on London and Netherlands exchanges.

What is the maximum number of ordinary shares that may be purchased under Shell plc's buyback program?

The maximum number of ordinary shares which may be purchased under the program is 480,000,000.