Wael Sawan: You want to take both?
Sinead Gorman: Sure. In terms of divestments, you mentioned specifically SPDC and Singapore. SPDC is a great step forward, gaining momentum. I’m very, very pleased to see that as an outcome. That will happen in the course of this year, we hope, waiting for those approvals, et cetera. You’ll also have seen we announced at the time that, approximately all of the, proceeds that came with it, so I’ll leave the detail there because there’s some financing in it as well. In terms of Singapore, which is really the refinery, Bukom, Jurong, the refining and chemicals plant together. We have confirmed that we are divesting, and we’re progressing through that. I’m hopeful to be able to update you later in the year on that, Peter. In terms of the proceeds, of course, wouldn’t talk about commercials at this point, but both of them are more about ensuring that it fits our strategy rather than significant cash flows coming in from divestments.
That gives you a bit of an indication. Secondly, in terms of inflation, yes, I’m glad you picked that up. If you look at our OpEx, what you actually see this year is actually that the OpEx year-on-year has come down. We’re really pleased to see that because what that means is, not only do we deliver the $1 billion of structural savings that we have discussed and that we have promised us on our route to our $2 billion to $3 billion, but more importantly, what we also did we at inflation and we managed to cover acquisitions coming in. And there were quite a few of those with Nature Energy, with Volta, and many other things, including new production, which drives cash flow as well, so significant performance by the business, which is pleasing to see.
What are we seeing on inflation? It is considerable. We’re beginning to see that come down, of course, as you go into 2024. Our own view on that is specifically that it’ll probably be between 3% and 7%, roughly speaking, but the way we structure our company, we are very much comfortable that we will be able to try and absorb that with our contracts and the variety of things we will do. We will see how it plays out in the year. It’s very much sticky in certain areas rather than others. Where do we see it specifically, Peter? We are seeing it more in some of the electrical installations and some of the fabrication areas specifically and of course, res, without a doubt, the renewable space is there. But that gives you a bit of a feel. I think, fundamentally, the message to take away is that, we have done exactly what we said.
We have been able to deliver structural savings, be able to eat inflation and be able to absorb new production coming in or acquisitions coming in.
Wael Sawan: Luke, can we have the next question please?
Operator: Our next call is Giacomo Romeo from Jefferies.
Giacomo Romeo: Thank you. First question is on your, payout level in 2023, which came above the upper end of the 30% to 40% range. And just trying to frame these and understand sort of what’s your approach, and are we allowed to talk about 40% as a soft ceiling like we used to with the previous range and under what circumstances you would be considering keeping it above that level? Second question is on Namibia. Just wanted to check what’s your work plan for this year? I think there is one more exploration well. I just wanted to check what’s your planned types of activity on the pelt of 39 this year?
Wael Sawan: Thanks, Giacomo. You want to take the first one?
Sinead Gorman: My preference is definitely not to introduce any new targets or anything else in. Let’s keep it to the fact that, if we say something we are going to do Giacomo, and that’s what you see coming through. So, 30% to 40% is through the cycle. That’s very much what we have said in Capital Markets Day, and that’s what you will continue to see us deliver. What is our thinking around that? We have a 4% progressive dividend, as you know, very attractive returns overall. Our shares remain undervalued by any metric that you want to look at, and therefore, we are looking to preferentially allocate towards those, really clear of why we would do that when you are sitting at 15% free cash flow yield. Of course, we are going to be going after the shares.
Comfort in terms of leaning on the balance sheet when I need to lean on it. But, fundamentally, what I’m doing is looking through the quarter, so it’s not specifically just on the individual quarter. I’m making sure that, I take a pragmatic approach to it and basically have confidence in what are the cash flows going forward of the of the company. Hence, the fact you saw the distributions that you saw so far.
Wael Sawan: Giacomo, on Namibia, a little to update at this stage. I think, as you are well aware, we have been drilling some exploration wells, some appraisal wells. We have a couple actually that we plan to drill in the coming months. As I have said in the past, there is no question around the volume of the resource. The biggest question is around finding the sweet spots within that resource, within the rock to be able to, create the opportunities for exciting developments there. And that’s what we have to be able to find out. We will take our time and be thorough in the way we look through that because these are significant capital investments, and therefore, we want to make sure that we are able to deliver return for our shareholders, and this is why we want to really, derisk the opportunity.
And, of course, it helps that we’re not the only ones drilling there. So, there’s other activities in the basin, which will, of course, provide more data points that informs the broader picture around the prospectivity of the basin and our ability to create value from it.
Operator: Our next caller is Josh Stone from UBS.
Josh Stone: Two questions, please. Firstly, just the recent elections in the Netherlands and the potential impact on Shell. I appreciate coalition talks are still ongoing, but do you see any risk to an impact to your green investments in the country are particularly interested in the biofuel and hydrogen projects. Do these continue regardless of the regulatory environment or could we see a slowdown if there’s a change in mandates? And then second question on Nature Energy. And maybe could you just talk about how that business is performing versus your expectation, and how the integration of the wider business is going and if you’ve learned any lessons in the biogas market in particular?
Wael Sawan: I’ll take the first one if you want to take the second one. I think what’s critically to say is all of our investments it’s irrespective of the country. I think you have to be resilient to multiple administrations, multiple governments coming in and coming out, Josh. I mean, that’s the reality. For the specific projects that you talked about in the Netherlands. Of course, the underpinning of the regulatory support is EU support, not just the Dutch support. A lot of what we tap into are the renewable energy directive, number one and number two, and potentially one day number three. Those are what create some of the broader support for those projects. And so far, we don’t see any moves away from that. And that’s going to be a key determinant of the success of those projects.
