Royal Dutch Shell will begin paying a cash dividend again in the fourth quarter of this year as a strategy update from the oil giant saw cash flow targets and pledge to continue cutting debt.
Ahead of the Anglo-Dutch group's 'management day', chief executive Ben van Beurden said his team was confident it can scrap its scrip dividend programme "while still investing at sufficient levels to maintain value accretive growth in the portfolio".
This is on top of the pervasively announced share buybacks of at least $25bn between 2017 and 2020 to sweep up the extra shares
issued under the scrip, though this was said to remain subject to progress with debt reduction and continued recovery in oil prices.
The outlook for annual organic free cash flow was increased to $25-30bn by 2020 at a Brent crude oil price
of $60 per barrel, up from the $20-25bn outlook in June last year.
Beyond 2020, Shell said it expects to continue to grow organic free cash flow at a more moderate rate with increased shareholder distributions in the form of share buybacks to support a stronger growth in its metrics per share.
With the $30bn assets divestment programme almost completed, with the final $5bn of sales "in advanced progress", Shell now expects to continue divestments at an average rate of at least $5bn a year until at least 2020.
Yet new projects are still on track to deliver 1m barrels of oil equivalent per day and $10bn of cash flow by 2018 and are expected to deliver an incremental $5bn cash flow from operations by 2020.
This is expected to be delivered with annual capital investment continuing within the range of $25-30bn, "and at current oil prices
capital investment will be managed towards the bottom end of that range, or lower if needed".
Annual underlying operational expenditure will remain below $38bn until 2020, with efficiency gains expected to deliver further reductions, building on the more than 20% reduction in operational expenditure since 2014.
Debt reduction remains a priority and with additional divestment proceeds since the third quarter, van Beurden now sees the 20% gearing target in sight.
The company also announced new carbon footprint goals for its energy products.
"Our next steps as we re-shape Shell into a world-class investment aim to ensure that our company can continue to thrive, not just in the short and medium term but for many decades to come," said van Beurden.
"These steps build on the foundations of Shell's strong operational and financial performance, and my confidence in our strategy and our ability to deliver on the promises we make."
He said Shell's aim was to cut the net carbon footprint of its energy products by around half by 2050, with a 20% cut in grams of CO2 per megajoule consumed by 2035.
"We will do this in step with society's drive to align with the Paris goals, and we will do it by reducing the net carbon footprint of the full range of Shell emissions, from our operations and from the consumption of our products."
Shell shares rose close to 3% on Tuesday morning.
Analysts at RBC Capital Markets noted that the third-quarter dividend, payable on 20 December, is not affected by the change and will be the last opportunity eligible shareholders have to choose to receive shares in lieu of cash.
Broker Hargreaves Lansdown said it was an "early Christmas present" for Shell shareholders, with the oil major's improved cash generation allowing the scrapping of the scrip dividend as debt improves steadily as well.
"It's not all plain sailing though," wrote analyst Nicholas Hyett. "The ambitious targets for a lower carbon footprint from its energy products reflects an increasingly carbon-conscious market, that's also reflected in the group's ongoing investment in new energies, which is set to step up from here.
"It's also worth remembering that Shell's double helping of motherhood and apple pie is predicated on $60 oil. The outlook for oil has improved, but the black stuff has spent most of the last 3 years below that level."