Josh Stone

Josh Stone inquired about the decision-making process for Shell's share buybacks, specifically whether the strong balance sheet, holding oil prices, and rerated share price made the decision to keep buybacks flat a close call.

Answer

CFO Sinead Gorman explained that capital allocation is a conscious quarterly decision. She highlighted that Shell has bought back approximately 25% of its shares over the last three years at an average price 20% below current levels. Gorman reiterated the sacrosanct 40-50% CFFO distribution target, noting that buybacks are still considered value-led, supported by a strong balance sheet with 20% gearing.

Josh Stone asked about the decision-making process behind Shell's latest share buyback program, specifically whether the company's strong balance sheet, higher oil prices, and increased share valuation influenced the decision to maintain the buyback amount.

Answer

CFO Sinead Gorman explained that capital allocation is a conscious quarterly decision, noting that Shell has bought back approximately 25% of its shares over the last three years at an average price 20% below current levels. She reiterated the sacrosanct 40%-50% CFFO distribution target, which was 52% this quarter, and affirmed that buybacks remain value-led given the strong balance sheet with 20% gearing.

Josh Stone followed up on the Q4 outlook, asking about the conservative integrated gas forecast despite expected liquefaction volume increases, other factors, and the potential headwind from hedging impact. He also inquired about Shell's plans for exploration drilling in Namibia next year, targeting areas, and willingness to add more capital.

Answer

Shell CFO Sinead Gorman explained that while Q4 integrated gas expects strong operational performance and ramp-up of LNG Canada, market arbitrage opportunities are less pronounced than in Q3. She confirmed that legacy hedging positions are still expiring through 2025, though less pronounced. Shell CEO Wael Sawan stated that Shell continues to have appetite to invest in Namibia at levels meeting high hurdles, assessing an appraisal well for a new horizon, and expects a decision in coming weeks. He also mentioned looking at other differentiated basins like the Porter.

Josh Stone asked about BP's focus on its gearing ratio (net debt to capital or equity), considering that asset sales reduce the asset base and the potential impact of impairments, despite the company's absolute net debt target.

Answer

Kate Thomson (CFO, BP) clarified that BP prioritizes financial resilience and an absolute net debt target of $14 billion-$18 billion by end-2027, representing a $10 billion reduction from the current $26 billion. She emphasized reducing total liabilities, including Deepwater Horizon payments and hybrid pre-financing, rather than focusing on a specific gearing target.

Josh Stone asked about the attention BP pays to its gearing ratio (net debt to capital or equity), considering the impact of asset sales on the asset base and potential impairments, in contrast to the absolute net debt target.

Answer

Kate Thomson (CFO, BP) emphasized financial resilience and BP's focus on its net debt target of EUR 14 billion-EUR 18 billion by end-2027, representing a EUR 10 billion reduction from the current EUR 26 billion. She explained that BP considers total liabilities, including Deepwater Horizon payments (EUR 1 billion/year, two more by 2027) and hybrid pre-financing (EUR 1.4 billion), projecting a EUR 13 billion-EUR 14 billion reduction in the total liability stack. She confirmed BP does not have a gearing target, prioritizing the net debt target.