Shell fourth quarter profits drop to $3.66bn, commences share buyback

Energy giant Shell (LON:SHEL) reported a drop in fourth quarter profits to $3.66 billion (£2.94bn) amid lower oil refining margins.

The adjusted earnings result for the period ending 31 December reflected a nearly 50% drop compared to its fourth quarter results in 2023, where Shell posted a $7.31bn profit.

Shell also announced a $3.5bn (£2.81bn) share buyback programme, at 0.358 cents per ordinary share.

The London-listed company raised its dividend by 4% as it posted earnings of £23.7 billion for the calendar year, down from £28.3 billion in 2023.

The company also recorded $2.2bn of impairments and losses on asset sales in the fourth quarter.

Shell chief executive officer Wael Sawan said 2024 represented a “strong financial performance” across the company.

“Despite the lower earnings this quarter, cash delivery remained solid and we generated free cash flow of $40 billion across the year, higher than 2023, in a lower price environment,” Sawan said.

“Our continued focus on simplification helped to deliver over $3 billion in structural cost reductions since 2022, meeting our target ahead of schedule, whilst also making significant progress against all our other financial targets.”

Since taking over as chief executive in 2023, Sawan has focused on cutting costs and shifting focus away from renewable energy to its core oil, gas and biofuels business.

In its Q4 results, Shell said the company has achieved structural cost reductions of $3.1bn since 2022, meeting its target set in 2023 a year early.

© Supplied by Shell

The cost cutting drive saw Shell reduce its 2024 cash capital expenditure to $21.1bn, with its capital expenditure in 2025 set to be even lower.

At the same time, Sawan said the 4% increase in Shell’s dividends makes it the 13th consecutive quarter of at least $3bn in share buybacks.

The company plans to update investors on its strategy at a capital markets day in New York on 25 March.

Sawan has previously mulled plans to move the supermajor’s primary stock listing from London to New York, calling Shell’s stock price “undervalued” compared to its US rivals ExxonMobil and Chevron.

Upstream results

Shell reported adjusted earnings of $1.68bn in its upstream segment as part of its Q4 results.

The company said its earnings reflect higher volumes offset by lower prices, above average well write-offs and higher year-end operational expenditure.

Shell achieved first oil at its Mero-3 floating production storage and offloading (FPSO) vessel in Brazil, alongside startup at its Whale platform in the Gulf of Mexico in January.

Elsewhere, Shell took a final investment decision on its Bonga North project in Nigeria, which the company said will support “portfolio longevity”.

The company forecast total production for the first quarter of 2025 in the range of 1,750-1,950 thousand barrels of oil equivalent per day (kboe/d).

In the North Sea, Shell said it expects to complete its asset tie-up with Norwegian state-owned operator by the end of 2025. If regulators approve the deal, the joint venture will become the UK North Sea’s biggest independent operator.

Shell results leave ‘sour taste’ for investors

Panmure Liberum research analyst Ashley Kelty said while Shell’s profit result is “not unexpected” it will “still leave a sour taste for investors”.

“The move away from low margin renewables continues, with the dip in performance not unsurprising given lower commodity prices and pressure on margins – which were well flagged,” Kelty said.

“Investors will now await the [capital markets day] in March for further updates on strategy and portfolio development.

“We wonder if the threat of a move to the US will resurface again due to the unfavourable business environment in the UK under the Labour Government.”