Shell (LON: SHEL) has no plans to list in New York, preferring to focus on its share buyback scheme to increase its value.
Speaking as part of the company’s presentation of its first-quarter 2024 results, Shell chief executive officer Wael Sawan said: “As a management team, we have a duty of care to continue to look at all opportunities to bridge that valuation, so we will always have an option like a listing or other elements under review, but I can tell you it’s not a live discussion at the moment for us.”
Rumours had pointed to Shell quitting the London stock exchange in favour of relisting in New York over concerns that the company was undervalued and that the US was friendlier to oil and gas companies.
Instead, Mr Sawan said that Shell will use share buybacks to correct what the company sees as an undervaluation in the company.
Shell plans to spend $3.5bn in share buybacks over the coming three months to bolster its share price.
“We acknowledge that we see our share price as being below what we think is a fair market value at the moment,” he said. “We will continue to lean into buybacks, and here’s another £3.5bn buyback for this quarter which underpins that commitment going forward.
“A simple relisting is not going to address the first point around fundamental valuation. It could potentially play a role in this disconnect that we see but for now what we’re focused on is the buyback.”
Share buybacks
Shell’s management hailed a strong quarter where it beat analyst forecasts with earnings of $7.7bn .
The company added $3bn to its balance sheet in the first quarter, helping fund its $3.5bn buyback.
Shell chief financial officer Sinead Gorman added: “What we saw this quarter was a fantastic operational performance which drove good cash flows – we saw lower capex, which gave us a bit of a bump in terms of free cashflow.
“In the past couple of quarters we’ve had lower cash flows from operations and fundamentally done $3.5bn of share buybacks. We’re now at ten quarters of at least $3bn of buybacks, so you see the pragmatic approach coming through and some consistency.”
In addition, Mr Sawan said: “What we have said at the capital markets day last June was our focus was on how we’re going to grow those fundamentals both on the free cash flow side absolute and the free cashflow per share, the latter being something we want to grow 10+% per annum through to 2025 and the former all the way to 2030 going at roughly 6% per year.
“Performance, discipline and simplification are at the core of what we need to be driving and what you’ve seen through this quarter is the outcome of that, you’re starting to see more stability in the operational performance, you’re starting to see the cost move in the right direction, you’re starting to see the discipline on capital starting to shine through, and of course, all the subsequent benefits of a stronger balance sheet and so on and so forth.”
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