* Shell warns of delays to $25 bln buyback programme
* Shell shares drop more than 4% on Thursday
* Analysts say caution undermines management
(Adds investor comment, Chevron, Exxon results, updates shares)
By Ron Bousso
LONDON, Nov 1 (Reuters) - Royal Dutch Shell faced a
torrent of criticism from analysts on Friday for warning of
possible delays to its $25 billion share buyback programme, with
some saying the move had undermined the credibility of the oil
giant's management.
Shell, the world's second-largest listed oil and gas
company, saw its shares close more than 4% lower on Thursday,
wiping out $10 billion of its market value. It had earlier
reported stronger-than-expected third-quarter profits which
were, however, overshadowed by Chief Executive Ben van Beurden's
warning about shareholder returns.
"The prevailing weak macroeconomic conditions and
challenging outlook inevitably create uncertainty about the pace
of reducing gearing to 25% and completing the share buyback
programme within the 2020 timeframe," van Beurden said.
In a call with analysts on Thursday, van Beurden sought to
play down the warning, saying Shell still intended to complete
the buyback on schedule by the end of 2020.
That did little to ease investor concerns.
"The planned $25 billion share buyback before end-2020 was
acknowledged by the CEO as a 'statement of the obvious.' We
agree but it had a predictable and in our view unnecessary
impact," UBS analyst Jon Rigby said in a note.
The comments, Rigby said, "are likely to exasperate
long-suffering investors further". Rigby retains a 'buy'
recommendation for Shell.
Shell, the most profitable oil major in 2018 ahead of larger
rival ExxonMobil, has in recent years been many
investors' top pick among the group after the Anglo-Dutch firm
cut costs and ramped up commitments for shareholder returns.
Shell plans to boost payouts to investors through dividends
and share buybacks to $125 billion between 2021 and 2025.
Bernstein analyst Oswald Clint said van Beurden was being
over-cautious.
"We've no doubt reiterating our buy on Shell is like talking
to the wall today and it's a blow for one of our 2019 top
picks," Clint said in a note.
Alasdair McKinnon of the Scottish Investment Fund, which
holds shares in Shell, said Shell were right to flag the
warning.
"Were they a bit harshly treated yesterday? Possibly but it
should mean that everyone's expectations are in the right
place," McKinnon told Reuters.
BP on Tuesday also indicated that its expected dividend
boost was now likely to happen next year and not by the end of
2019.
After a decade of weakness, concerns over the ability of the
world's top oil companies to boost shareholder returns compound
worries about the sector as investors shun independent oil and
gas producers, particularly U.S. shale firms.
Morgan Stanley analyst Martijn Rats said he now assumed the
buyback programme would be completed a year later than planned.
Given the economic environment and expected decline in cash
generation, Shell will be able to cover its $15 billion dividend
commitment from its operations, leaving little room for buybacks
and debt reduction, Rats said.
Jefferies analyst Jason Gammel said Shell's "management
credibility has now been strained". Gammel retained his "buy"
recommendation on Shell, "with somewhat less enthusiasm".
Shell shares were up 0.6% at 1325 GMT.
U.S. rivals Exxon and Chevron both reported sharp
drops in third-quarter profits on
Friday.
(Reporting by Ron Bousso; Editing by Dale Hudson and Mark
Potter)
BP (BP.)
