Shell Q4 profits miss expectations but dividend hiked
By Michele Maatouk
Date: Thursday 30 Jan 2025
(Sharecast News) - Oil giant Shell lifted its dividend on Thursday even as it posted a bigger-than-expected drop in fourth-quarter profits.
Fourth-quarter adjusted earnings fell to $3.66bn from $6bn in the third quarter. This reflects lower prices and margins, higher exploration well write-offs, and the non-cash impact of expiring hedging contracts on LNG trading and optimisation results, Shell said. Analysts were expecting third-quarter adjusted earnings of $4.3bn.
For the full year, adjusted earnings fell to $23.7bn from $28.3bn in 2023.
Still, free cash flow for the year came in at $39.5bn, up from $36.5bn and Shell upped its dividend by 4% for the fourth quarter to $0.358. It also kicked off a $3.5bn share buyback programme, expected to be completed by Q1 2025 results announcement.
Chief executive Wael Sawan said: "2024 was another year of strong financial performance across Shell. 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.
"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.
"Today, we announce a 4% increase in our dividends and another $3.5 billion buyback programme, making this the 13th consecutive quarter of at least $3 billion of buybacks, all whilst further strengthening our balance sheet this year to position us well for the future."
At 1005 GMT, the shares were up 0.6% at 2,611p.
Russ Mould, investment director at AJ Bell, said: "The market has taken news of a big drop-off in profit for Shell in the fourth quarter in its stride. Investors in oil companies generally accept there can be considerable volatility in quarterly earnings given commodities prices are often subject to wild swings.
"Shell has raised its dividend and unveiled a new share buyback, suggesting it is not too worried about its performance in the final three months of 2024.
"In the 18 months since Wael Sawan took the helm at Shell, he has been focused on trying to increase efficiency and bring some hard-nosed business sense to the running of the business.
"His big strategic move has been to dial back the company's previous commitment to the transition - essentially taking the attitude it's fine to invest in renewables and other clean energies but these investments have to stack up on their own merits.
"Like a marathon runner which has fallen behind the leading pack, Sawan is desperately trying to close Shell's valuation gap to its US rivals and, while he has had more joy than his counterpart at BP, that gap still exists.
"A strategy update in March is an opportunity for Sawan to lay out the next steps. The fear in the London market is that this update includes shifting the primary listing out of London and to the US, where Sawan could argue the investment case might get a kinder hearing."
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