Shell on Thursday reported a 16% drop in 2024 annual profit as a result of weaker oil and gas prices and demand while further increasing shareholder returns in a sign of confidence in its strategy of refocusing on its most profitable sectors.
The oil major announced a 4% dividend increase and a $3.5 billion share buyback for the current quarter, making this the 13th consecutive quarter of at least $3 billion of share repurchases.
Its shares gained more than 1% even as the group reported that its 2024 adjusted earnings, its definition of net profit, fell to $23.72 billion from $28.25 billion in 2023, dented by narrower liquefied natural gas (LNG) trading margins, lower oil and gas prices, and weaker refining margins.
The annual earnings fell short of a $24.64 billion consensus compiled by LSEG and $24.11 billion forecast by analysts polled by Vara Research.
Shell, the first major energy company to report results, said fourth-quarter earnings nearly halved from previous year to $3.66 billion, also missing analysts’ expectations.
“As expected, Shell reported 4Q results this morning which showed relatively soft earnings, but continued strong cash generation,” RBC Capital Markets analyst Biraj Borkhataria said in a note, also highlighting the consistency with which the group has been returning cash to shareholders.
In his prepared remarks, CEO Wael Sawan said the share buybacks were “underpinned by the significant progress that we are making as an organisation.”
Sawan has been focused on cutting costs and pivoting the company back to its most profitable sectors — oil, gas, and biofuels — while shifting away from renewable power.
The world’s leading oil and gas companies experienced a decline in profits through 2024, following record earnings in the previous two years, as energy prices stabilised and oil demand weakened.
Shell also expects 2025 capital expenditure to fall below last year’s $21 billion, with more details to be shared at its capital markets day in March.
Shell’s refining operations reported an adjusted loss of $229 million in the chemicals and products unit, compared to a $29 million profit last year.
Refining margins weakened globally due to reduced economic activity and new refineries opening in Asia and Africa.
In the fourth quarter, Shell ran its refineries at 76% capacity, and said it expected to increase that to 80-88% in the first quarter.
Shell also said that it did not have a timeline for the arbitration proceedings regarding LNG supply from Venture Global’s Calcasieu Pass facility.
Venture Global, whose $58 billion market debut fell short of high expectations last week, began generating proceeds in 2022 when its first facility, Calcasieu Pass, started production.
However, the lengthy testing and optimising process before commercial operation has led to contract disputes with customers, including BP, Shell and Italy’s Edison, over non-receipt of contracted cargoes.
“Delaying those cargoes simply means that we have to go out and buy higher priced spot cargoes to meet demand and ultimately, it impacts end consumers,” Shell Chief Financial Officer Sinead Gorman told reporters on Thursday.
(Reporting by Arunima Kumar in Bengaluru; editing by Savio D’Souza, Jason Neely and Tomasz Janowski)