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Shell’s chief executive says he hopes to buy back more of his own shares than he will start buying bids for rival oil major BP.
“We’re always looking at these things, but you also want to see alternatives,” Wael Sawan told The Financial Times. “Now, buying Shell Co. for us remains the right alternative.”
Shell has been permanently linked to BP bids after the latter stock price fell 32% over the past year. Elliot Management, an activist hedge fund that built a 5% stake in BP, warns that the company is facing acquisitions unless management cuts its costs and spending more deeply.
Sawan’s comments on Friday came when Shell announced in its first quarter results that it would hand over $3.5 billion to investors by buying back its own shares, a 14-quarter 14-quarter that spent more than $3 billion to reduce its shares.
Shell reported adjusted profits of $5.6 billion in the first quarter. It fell 28% year-on-year, but is about 10% ahead of analysts’ expectations. That stock rose 2.15% on Friday.
Sawan said Shell is preparing for a fall in oil prices in the coming months after crude plunged to four years’ decline in global economic concerns and increased supply from the oil cartel OPEC. Brent crude traded at $63 per barrel on Friday, down from $76 at the beginning of the year.
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Sawan said the company’s balance sheet is at its best in 10 years, with gearing being under 19%, with 7% excluding leases that shells have on its equipment. “It’s not bad to go to some of the choppy weather we’re looking at,” he said.
“The past two years have been about being a more lean and fitter. We have taken steps in anticipation of what could potentially be a softer environment, so our plans have not changed,” he said.
Sawan said Shell could continue to pay dividends. It held a 36 cent share in the first quarter at a price of $40 oil, and said the company could buy back $7 billion in shares each year, even if it still cuts $6 billion to $7 billion in shares to $50 per barrel.
