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* Shell cuts quarterly dividend by two-thirds
* Shell cuts output by about a quarter
* Chairman says dividend cut is part of a 'reset'
* First-quarter profits slump 46%
* GRAPHIC-Big Oil slashes spending: https://reut.rs/39u1Dh3
(Adds chairman comment, updates shares)
By Ron Bousso and Shadia Nasralla
LONDON, April 30 (Reuters) - Royal Dutch Shell cut
its dividend for the first time since World War Two on Thursday
as the energy company retrenched in the face of an unprecedented
drop in oil demand due to the coronavirus pandemic.
Shell also suspended the next tranche of its share buyback
programme and said it was reducing oil and gas output by nearly
a quarter after its net profit almost halved in the first three
months of 2020.
Shell's shares in London had slumped 7% by 0753 GMT, sharply
underperforming rival BP which was down 2.2%.
For years, Shell has taken pride in having never cut its
dividend since the 1940s, resisting such a move even during the
deep downturns in the oil market of the 1980s.
Some investors, however, had called on major oil firms to
break an industry taboo and consider cutting dividends, rather
than taking on more debt to maintain payouts.
"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,"
Shell Chairman Chad Holliday said.
He also said the cut in Shell's payout was a long-term
"reset" of the company's dividend policy.
Shell said it would reduce its quarterly dividend by
two-thirds to 16 cents per share from the 47 cents it paid each
quarter in 2019. If maintained for 2020 as a whole, Shell would
save about $10 billion.
Shell is the first of the five so-called Oil Majors to cut
its dividend because of the fallout from the coronavirus crisis.
BP and Exxon Mobil have said they will maintain their
first-quarter dividends while Total and Chevron
have yet to report first-quarter results.
'NECESSARY EVIL'
The dividend cut also comes after Shell this month laid out
the oil and gas sector's most extensive strategy yet to reduce
greenhouse gas emissions to net zero by 2050.
"The 66% dividend cut is a necessary evil to reinforce
Shell's capital frame and position it for the offence on the
energy transition," JP Morgan analyst Christyan Malek said.
Shell paid about $15 billion in dividends last year making
it the world's biggest payer of dividends after Saudi Arabia's
national oil company Saudi Aramco.
Dividends paid by Shell and BP last year also represented
24% of the 75 billion pounds ($94 billion) in total paid out by
companies in the FTSE 100 index of leading shares.
Following years of deep cost cuts after its acquisition of
BG Group for $53 billion in 2016, Shell had previously planned
to boost payouts to investors through dividends and share
buybacks to $125 billion between 2021 and 2025.
Outside the Oil Majors, Norway's Equinor became
the first large oil company to cut its dividend in response to
the current downturn, reducing its first-quarter payout last
week by two-thirds.
Global energy demand could slump by 6% in 2020 due to
coronavirus lockdowns and travel restrictions in what would be
the largest contraction in absolute terms on record, the
International Energy Agency (IEA) said on Thursday.
Shell last month said it would reduce capital expenditure
this year to $20 billion at most from a planned level of about
$25 billion and also cut an additional $3 billion to $4 billion
off operating costs over the next 12 months.
Its first-quarter net income attributable to shareholders
based on a current cost of supplies and excluding identified
items, fell 46% from a year earlier to $2.9 billion, above the
consensus in an analyst survey provided by Shell.
Shell's fourth-quarter net income was also $2.9 billion.
The company said it cut activity at its refining business by
up to 40% in response to the demand shock.
Shell said it expected to cut production of oil and gas in
the second quarter to between 1.75 million and 2.25 million
barrels of oil equivalent per day (boed) from 2.7 million boed
in the first quarter.
Shell's gearing, or its debt-to-capital ratio, inched down
to 28.9% in the first quarter from 29.3% in the fourth quarter,
but was up from 26.5% in the same period a year earlier.
($1 = 0.8021 pounds)
(Reporting by Ron Bousso and Shadia Nasralla; Editing by David
Clarke)
