Speaker 1: We are nine joints by Wales so On CEO of
Speaker 1: Shell so Wale, good morning. Thank you for joining us
Speaker 1: on the buyback then three point five billion RBC. Before
Speaker 1: these results, one of their allets came out and said
Speaker 1: you could raise that buyback it's a four billion. Are
Speaker 1: you being overly conservative on the return of cash to shareholders?
Speaker 2: Thank you for the opportunity this morning. What I'd say
Speaker 2: is we have actually announced in June of last year
Speaker 2: that we wanted to go on what we called our
Speaker 2: first ten quarter sprint, which just drove the fundamentals of
Speaker 2: the company to become much stronger, lower cost. We have
Speaker 2: now announced one point seven billion dollars of cost takeout,
Speaker 2: more capital, discipline, improved operational performance, all allowing us to
Speaker 2: continue to be able to indeed enhanced shareholder distributions. We've
Speaker 2: talked about thirty to forty percent of our cash flow
Speaker 2: from operations going to distributions, and you're right to say
Speaker 2: that we are with the three point five billion dollars.
Speaker 2: We've been approaching the higher end, if not slightly above
Speaker 2: the forty percent. And what we continue to focus on
Speaker 2: is consistency of delivery. This is not about simply one
Speaker 2: quarter after the next, looking at what we can do
Speaker 2: from a distribution's perspective, but looking through this period and
Speaker 2: continuing to make sure that we are able to reward
Speaker 2: our shareholders consistently at the higher end while continuing to
Speaker 2: moderately deleverage and invest in our businesses. So overall, we
Speaker 2: like the balance of where we are at the moment.
Speaker 1: Do you like the balance of the mix, though, in
Speaker 1: terms of the upstream during the heavy lift, the downstream
Speaker 1: looking a little vulnerable, refining margins still a little soft. Well,
Speaker 1: is the business vulnerable if oil moves low? You've benefited
Speaker 1: from eighty five dollars hour all over the quarter. That
Speaker 1: environment could change.
Speaker 2: It's fair to say that we have seen in essence,
Speaker 2: normalization of prices and margins across the energy system back
Speaker 2: down to pre twenty twenty two levels, whether you're talking
Speaker 2: refining margins, whether you're talking LNG prices, even power prices.
Speaker 2: We are building a company that is actually resilient to
Speaker 2: the low side of the prices as well, and that's
Speaker 2: critical for us. We create value through the cycles, and
Speaker 2: what we have done is by taking at some of
Speaker 2: our costs, by really focusing on the capital discipline. We
Speaker 2: believe that we have an organization, a company that is
Speaker 2: able to continue to buy back shares to as low
Speaker 2: as fifty dollars oil price that puts us in a
Speaker 2: good situation. Our balance sheet is the strongest that it
Speaker 2: has been in a very, very long time, and our
Speaker 2: fundamental business model continues to work. While indeed we enjoy
Speaker 2: the upside during high commodity prices. It's important to recognize
Speaker 2: our marketing business particularly performs really well when you see
Speaker 2: commodity prices go down, and of course we have the
Speaker 2: world's leading trading business which also allows us to take
Speaker 2: advantage of those volatility moments. So by and large, we
Speaker 2: like this model we have of a multi energy vector
Speaker 2: company that allows us to be able to win in
Speaker 2: today's energy system, but also importantly to continue to win
Speaker 2: in the lower carbon energy system of the future, of
Speaker 2: which we are committed to play our role.
Speaker 3: Talk there, good morning to you. Talk there about the
Speaker 3: resilience of the business down to fifty dollars barrel. In
Speaker 3: terms of the oil price. Clearly there's a lot of
Speaker 3: focus on whether we see a higher oil price from here,
Speaker 3: partly perhaps driven by geopolitical tensions. We haven't necessarily seen
Speaker 3: prices come in as high as they could have done
Speaker 3: since the most recent bout of Middle East tension. What
Speaker 3: are you braced for? What do you think could happen
Speaker 3: on oil prices as a result of this?
Speaker 2: Geopolitics very difficult to predict. It's fair to say that
Speaker 2: at the moment we see that the physical markets are
Speaker 2: well balanced, if anything slightly tight, in particular on crude.
Speaker 2: Going into the summer season, we saw stock draws all
Speaker 2: across the world except for China. I think the biggest
Speaker 2: determinant of where prices might go is a combination of indeed,
Speaker 2: as you mentioned, geopolitics, but critically OPEC's decision in the
Speaker 2: coming weeks, around the pace at which it unwinds its cuts,
Speaker 2: and of course the Chinese demand, of which there are
Speaker 2: mixed signals at the moment. And so what we try
Speaker 2: to do is to focus on what we can control,
Speaker 2: and what we can control is everything from our own
Speaker 2: cost structure, our capital discipline, our operational performance, and the
Speaker 2: portfolio choices we make. We want to make sure that
Speaker 2: we are allocating our capital in the most responsible way
Speaker 2: we can.
Speaker 3: Okay, and so with that in mind, well you might
Speaker 3: not like this question, which maybe you think is something
Speaker 3: you can't control US politics. I wonder what's at stake there, though,
Speaker 3: because you do have to think about these things even
Speaker 3: when you can't control them. LNG markets in particular, do
Speaker 3: you see the USLNG landscape shifting considerably dependent on whether
Speaker 3: we have a Harris or a Trump administration.
Speaker 2: We don't see major shifts in the short to medium term.
Speaker 2: These projects that are being talked about would only come
Speaker 2: which are being held at the moment, would only really
Speaker 2: sort of start up towards the end of this decade
Speaker 2: early the next decade, and so for the next five
Speaker 2: to six years, whatever is in the funnel and and
Speaker 2: already sort of under construction will be what comes into
Speaker 2: the market. But indeed, as I've said in the past,
Speaker 2: the biggest issue is the LNG markets like any other
Speaker 2: energy market that looks at long term fundamentals, requires stability,
Speaker 2: requires consistency, requires predictability, and any major policies that start
Speaker 2: to rattle investors in those big infrastructure projects can potentially
Speaker 2: undermine confidence in that market, which which I think would
Speaker 2: be a real miss given the incredibly important role that
Speaker 2: LNG in particular will need to play. In the energy transition,
Speaker 2: both from an energy security perspective but also from an
Speaker 2: energy transition perspective for call to gas switching.
Speaker 1: Are you getting that? Are you getting that reassurance? Here?
Speaker 1: In the UK? The new Labor government raising the windfolds
Speaker 1: ax on energy players here. What is your response to
Speaker 1: that move.
Speaker 2: Look, we've invested for a long long time in the
Speaker 2: UK and in successive recent government means what we have
Speaker 2: seen is changes to the overall framework for the energy system.
Speaker 2: For the energy investments. The number one thing we look
Speaker 2: for when we look to invest, Given the nature of
Speaker 2: our investments, which typically are long term investments, multidecadal investments,
Speaker 2: both by the way, in the conventional energy space as
Speaker 2: well as in the new energy space, what we look
Speaker 2: for is physical and regulatory stability and anything that potentially
Speaker 2: destabilizes that, of course, is not welcome. And so what
Speaker 2: we continue to do is to engage constructively with the
Speaker 2: government to be able to clearly express our views and
Speaker 2: then to respond to the signals that the government chooses
Speaker 2: to put into place.
Speaker 3: Have you already been engaging with the government, Well, what
Speaker 3: are the early signals You're guessing we.
Speaker 2: Have been engaging with the government for several weeks now,
Speaker 2: and we expect continued engagement in the coming weeks. I
Speaker 2: continue to hope for a balanced approach, recognizing some of
Speaker 2: the challenges that the incoming government is trying to deal with.
Speaker 2: But at the same time, what we can do from
Speaker 2: a SHELL perspective is to advise on what are the
Speaker 2: key ingredients of an investment climate that will be conducive
Speaker 2: to the sources of investment that are able to support
Speaker 2: any government as it's thinking about its energy policy. We've
Speaker 2: said to many governments we are willing partners in their
Speaker 2: efforts to establish energy security and decarbonize their energy grid
Speaker 2: as long as it makes sense from a strategic perspective
Speaker 2: for us, and as long as we see the stability
Speaker 2: that is required.
Speaker 3: Well, thank you very much, thanks for joining us. Well
Speaker 3: so on the CEO of Shell.