Shell mulls equity restructuring to hasten dividend payments


Listed firm Pilipinas Shell Petroleum Corporation is planning to pursue equity restructuring so it can reverse its negative retained earnings last year, which in turn will allow it to accelerate its targeted cash dividend payment to its shareholders.

“We are working very quickly to rebuild our retained earnings through strong earnings delivery quarter-on-quarter, as well as a possible equity restructuring subject to the approval of SEC (Securities and Exchange Commission),” Pilipinas Shell Chief Finance Officer Reynaldo P. Abilo has stated during the company’s annual stockholders’ meeting on Tuesday (May 11).

He explained that with equity restructuring, the oil firm would be able to “reduce our retained earnings deficit faster and enable us to declare dividends from our current and future net income and cash generation.”

Abilo emphasized there are three key prerequisites that the company has been weighing in relative to decision on cash dividend payment to shareholders and these include: available cash; strong net income; and positive retained earnings.

The company executive reiterated that “providing attractive and meaningful dividend to our shareholders remains key to our priorities,” albeit he qualified that it was on the retained earnings part of the metrics wherein the company had not performed well last year -- mainly because of the pandemic and the one-off item arising from the business step to transform the Tabangao refinery into a world class import terminal for finished products.

“For 2020 as you might have seen, we drove our retained earnings into negative territory and that is primarily because of the one-off cost that we have to take in as part of our decision to convert the refinery into world-class import facility,” Abilo stressed.

Conversely, amid last year’s pandemic-induced challenges, he noted that Pilipinas Shell still demonstrated its “ability to generate good cash performance despite the very challenging business environment.”

This year, with the manifest demand recovery in the domestic oil market, Abilo  indicated that “in terms of earnings in line with our strategy, we are aspiring to grow our net earnings at least at GDP (gross domestic product) growth rates of the country.”

Pilipinas Shell President and CEO Cesar G. Romero expounded that “for 2021, we see our performance to be strongly correlated to the performance of the Philippine economy.”

He thus pointed out “if the Philippine economy recovers in conjunction with positive developments in the health crisis, then we see every reason to see improvements in our businesses as well.”

Romero, nevertheless, highlighted that the devastating impact of the Covid-19 pandemic is still ever present in the oil business, with him citing the “slower demand due to increase in Covid-19 cases,” as well as the logistical constraints confronting them in opening new stations especially in areas where stricter quarantines are imposed.

Given such lingering predicaments, Romero said “financial resilience and prudent investments remained a priority to ensure that we are able to weather any prolonged challenges, at the same time, be in a position to emerge stronger from the crisis.”

Pilipinas Shell Board Chairman Min Yih Tan also conveyed that “the Philippines continues to be a country of positive interest for Royal Dutch Shell…a country with robust macroeconomics and attractive demographics which puts it in a very good position to survive and recover and thrive from the crisis.”

He further asserted “in line with business practice, Shell will continuously monitor and adjust its strategy organization and business portfolio to stay viable and competitive with these times as we’ve done over the years in the past and we will continue to do so going forward in the future.”

Tan added the oil company will be “strengthening cash-efficient businesses, such as retail or mobility, commercial fuels, lubricants and bitumen in a purposeful and profitable way.”