The oil and gas company Shell recorded a 46% drop in net earnings in the first quarter to hit $2.9 Billion. This massive decline has forced the oil multinational to cut dividend payout to its shareholders for the first time since World War Two.
Shell Directors attribute this fall in net earnings to the collapse in global oil demand due to the coronavirus pandemic. The energy giant also suspended the next tranche of its share buyback program.
Shell Chief Executive Ben van Beurden warned of “continued deterioration in the macroeconomic outlook”.
He said Shell was taking “further prudent steps to bolster our resilience” and “underpin the strength of our balance sheet”.
Global demand for oil has all but dried up as lockdowns across the world have kept people inside.
Shell said it had cut activity at its refining business by up to 40% in response to the sharp fall in demand for oil.
Shell’s debt has piled up from $1 billion in 2005 to $ 73 billion today. During that same period, it paid out $153 billion in dividends and spent $48 billion buying back its own shares.
The British oil company is shifting focus from oil and gas and into environmentally-conscious ventures.
Russ Mould, investment director at AJ Bell, said: “Shell’s decision to reduce its dividend is devastating to investors across the country, as so many people own its shares directly or through their pension as an important source of income.”
More than 300 companies on the UK stock market have this year said they won’t be paying dividends for the time being or paying a much lower level than before.
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