Shell dividend cut frees up US$10bn

Anglo-Dutch supermajor Shell today slashed its dividend by 66%, the first time the company has cut cash distributions to shareholders since World War II.

The annual pay-out will fall from US$15 billion to US$5 billion, freeing up US$10 billion of capital.

The last time one of the supermajors cut the dividend was BP, in the immediate aftermath of the Macondo disaster.

Luke Parker, vice president with Wood Mackenzie’s corporate analysis team, said: “The move is a sensible and prudent action to preserve cash in the face of huge macro uncertainty. We estimate the cut reduces Shell's 2020 cash flow breakeven from US$51/bbl to US$31/bbl.”

Parker added “A permanent dividend reset would also help fund an accelerated strategic pivot to 'Big Energy' through the reinvestment of maturing oil and gas cash flow into the youthful zero-carbon energy sector.”

Shell’s dividend cut has thrown down the gauntlet to the supermajors. BP, Chevron, ExxonMobil and Total are due to pay out US$41 billion of dividends in 2020. Combined pay-outs would fall by US$27 billion if they all cut by 66%, reducing 2020 cash flow breakevens by US$15/bbl on average.