(Alliance News) -Â Royal Dutch Shell PLC on Thursday announced its first dividend cut since the second world war as it grapples with lower oil prices.
Shell's first quarter current cost of supplies earnings attributable to shareholders, excluding items, were USD2.9 billion, down 46% on a year ago due to a drop in oil, gas and liquefied natural gas prices as well as lower sales volumes.
Earlier in April, West Texas intermediate crude oil prices crashed into negative territory as the expiry date for the May contract loomed. Oil markets have plunged in recent weeks as lockdowns and travel restrictions to fight the coronavirus around the world have battered demand, compounding an earlier production war between Saudi Arabia and Russia.
For the first quarter, Shell's global liquids realised price was USD46.53 per barrel, down from USD57.42 a year ago.
Among divisions, Upstream earnings slumped to USD291 million from USD1.65 billion due to the lower oil and gas prices as well as a 5% decrease in production. Integrated Gas earnings fell to USD2.14 billion from USD2.57 billion, also reflecting lower prices.
The oil major produced 3.7 million barrels of oil equivalent per day, down 1% on a year before.
"Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell. Starting this quarter, the board has decided to reduce our quarterly dividend," Chief Executive Ben van Beurden.
Shareholder returns are "a fundamental part" of Shell, the company said.
"However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the board believes that maintaining the current level of shareholder distributions is not prudent."
It has slashed its first quarter dividend to 16 US cents.
Shell has not cut it since World War Two, but there has not been a hike since 2014. It paid out 47 cents each quarter in 2019.
Peer BP on Tuesday declared a first-quarter dividend of 10.5 US cents, up 2.4% from 10.25 cents in the fourth quarter and first quarter of 2019.
Shell Chair Chad Holliday said: "As conditions allow, the board will continue to evaluate our capital allocation priorities between ongoing investment in our business, maintaining a strong balance sheet and increasing returns to shareholders which remains our ambition."
Shell 'A' shares were down 3.6% to 1,432.60 pence early Thursday in London, while 'B' shares were down 4.1% at 1,392.27.
By Lucy Heming;Â lucyheming@alliancenews.com
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