By Adam Whittaker

Shell said it is targeting hydrocarbon production growth and plans to further increase shareholder returns as the energy giant outlined its strategy for the next five years at its capital markets day.

The London-listed company said Tuesday that its new strategy will deliver more value with less emissions and includes increased cost-reduction target and lower capital expenditure.

Its update comes weeks after British peer BP jettisoned its low-carbon strategy and cut spending on energy-transition assets in favor of core oil-and-gas production.

Shell said it would grow top-line production across its upstream and integrated gas business by 1% a year through 2030. This will sustain its 1.4 million barrels a day of liquids production through 2030, it said.

The oil major will also target sales growth in its liquefied natural gas business of 4% to 5% a year through to 2030. Chief Executive Officer Wael Sawan said he wants to position Shell as the world's leading integrated gas and liquefied natural gas business.

Diversified oil companies have pivoted back to hydrocarbon assets and the lack of visibility in Shell's upstream portfolio beyond 2030 has been a key concern amongst investors, analysts at RBC Capital Markets wrote in a note last week.

Its 2023 strategy abandoned a previous target of letting oil production decline by 1% to 2% a year by 2030 versus 2019.

Shell said it would will also increase shareholder distributions to 40% to 50% of cash flow from operations, or CFFO, from a previous target of 30% to 40%. The company will continue to prioritize share buybacks and said it will maintain its 4% a year progressive dividend policy. At its 2023 capital markets day, Shell increased its shareholder returns ratio to 30% to 40% of CFFO from a previous target of 20% to 30%.

Meanwhile, Shell increased its structural cost-reduction target to $5 billion to $7 billion by the end of 2028, compared to 2022. It had met an original target of $2 billion to $3 billion by the end of 2025 a year early.

The company is aiming for capital expenditure of $20 billion to $22 billion a year compared with the $21.1 billion it posted in 2024. HSBC analysts wrote in note ahead of the strategy release that it expected capex guidance of between $22 billion to $23 billion.

Shell also said that it expects to have up to 10% of capital employed in lower-carbon platforms by 2030.

The business will seek to unlock more value from its chemicals assets and will explore partnership opportunities in the U.S., and the selective closure of European assets, Shell said.

The company will maintain the climate targets and ambition it set out it in its energy transition strategy in 2024, it said.

Analysts hadn't expected Shell to make major changes to the strategy it set out in June 2023 which increased shareholder returns, set cost-reduction targets and sought to stabilize oil production.

Its previous "sprint through to 2025" plan also set the goal of simplifying its organization and portfolio of assets.

Write to Adam Whittaker at adam.whittaker@wsj.com

(END) Dow Jones Newswires

March 25, 2025 03:51 ET (07:51 GMT)

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