Shell raises capex, cash flow targets in new outlook to 2025

Shell announced higher, longer-term capital spending and cash flow targets for the coming years Tuesday, as the oil major looks to underpin growth by further developing its gas-rich upstream portfolio and emerging power sector business.

Updating its strategy, Shell said it plans to invest, on average, $30 billion of cash capex a year over 2021-2025, including a minor acquisition spend of up to $1 billion, with a ceiling of $32 billion a year. It said the target, however, excludes “major inorganic opportunities” over the period.

Shell also raised and extended its free cash flow target by up to $10 billion a year, to around $35 billion in 2025 assuming a $60/b Brent oil price. It had previously targeted free cash flow of $25 billion-$30 billion by the end of the decade.

“We have reshaped our company with a focus on value and have demonstrated a clear track record of delivering on our ambitious promises made at our Management Day in November 2017,” CEO Ben van Beurden said in a statement.

In the upstream sector, Shell — which does not issue production targets — said it is looking to grow its deepwater, shale and conventional oil and gas businesses. The company also wants to further develop its integrated gas, chemicals, fuels business and emerging power sector investments.

Europe’s largest oil company’s production averaged 3.75 million b/d of oil equivalent in the first quarter of 2019, down 2% from 3.84 million boe/d a year earlier. “Upstream continues to focus on delivery and financial performance and is expected to continue generating robust cash flow for decades to come. It has a strong development funnel of projects that offers long-life, resilient growth opportunities,” Shell said. The company, which has delivered $30 billion of divestments from 2016-2018, said it plans to achieve a return on average capital employed of more than 12% in 2025 and maintain its debt gearing of 15-25% through the period.

By the end of next year, Shell said it plans to complete its $25 billion share buyback program in combination with reaching a gearing level of 25%. Further ahead, Shell said it has the “potential” to make distributions to shareholders of $125 billion or more in the form of dividends and share buybacks from 2021-2025.