Royal Dutch Shell gets lukewarm praise for cash flow generation


There was a whiff of “so what?” in broker reaction to Wednesday’s second-quarter update from Royal Dutch Shell PLC’s (LON:RDSB).

Citigroup called it “a relatively subdued update”, as it reiterated its neutral position.

Headwinds from liquefied natural gas (LNG) trading offset some of the gains from rising oil prices, chemical margins and improved mobility/marketing margins, the US brokerage said.

“However, the strength of the macro outlook is enough for the company to signal the start of the much-anticipated share buyback programme: we forecast total 2022e distributions yielding 5.8% to equity,” Citi said.

Shell said in its update it will move to “the next phase of its capital allocation framework” and increase total shareholder distributions to within the range of 20-30% of cash flow from operations.

JPMorgan reckons the oil giant will buy back around US$500mln in the third quarter. Its recommendation is for investors to be overweight in the shares.

On the subject of cash flow, Barclays said it expected a positive reaction to the quarterly update, “reflecting the group’s ability to generate free cash flow”.

Shares in Royal Dutch Shell were down 1.5% at 1,399.4p in late morning trading.


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