By Shadia Nasralla and Stephanie Kelly
LONDON, Feb 5 (Reuters) – Shell missed fourth-quarter profit expectations on Thursday with an 11% drop to the lowest level since early 2021 amid weaker oil prices, but kept its bumper share buyback programme.
Shareholders of oil majors have become used to huge buybacks, but lower oil and gas prices ahead of an expected crude and liquefied natural gas glut have prompted speculation they might be reduced, especially at European firms.
Shell has bought back about a quarter of its stock in the last four years, or about $60 billion – including $14 billion in 2025, according to LSEG data.
At a continued pace of $3.5 billion per quarter, plus dividends, it is currently above its target payout range.
U.S. rival Exxon pledged to keep its $20 billion buyback programme steady this year, while Norway’s Equinor, meanwhile, slashed its buyback programme by 70% on Wednesday.
CHEMICALS BUSINESS WEIGHS
Profits at Shell’s integrated gas and marketing divisions missed expectations, while a loss in its chemicals and products unit – hit by weak oil trading and a broad chemicals market rout that Shell had flagged – was deeper than analysts expected.
The stock was down 1.9% in early trading, underperforming a 1.6% drop in the European energy index.
Fourth-quarter net profit came in at $3.3 billion, below analysts’ average estimate of $3.5 billion in a company-provided poll for adjusted earnings, Shell’s definition of net profit.
SHAREHOLDER PAYOUTS
The share buyback, together with $2.1 billion in dividends, lifted shareholder payouts over the last four quarters to 52% of operating cash flow, above Shell’s 40% to 50% target range over 12 months.
Asked about this, Chief Financial Officer Sinead Gorman told reporters that range was “sacrosanct”.
Shell increased its quarterly dividend by 4% to $0.372 per share, as planned, and has achieved $5.1 billion in cost cuts out of a target of $5 billion to $7 billion by 2028 compared with 2022.
The world’s largest LNG trader reported fourth-quarter cash flow from operations of $9.44 billion, ahead of expectations for $7.87 billion but down from $13.16 billion a year earlier.
QUESTIONS ABOUT M&A
RBC analysts noted that Shell’s reserve life had fallen to 7.8 years, from 8.9 years in 2024. “Given this is weaker than some peers, we anticipate this could fuel more questions around Shell’s M&A reserve replacement strategy,” they said.
At the last strategy update in March, CEO Wael Sawan had warned of a 100,000 to 200,000 barrel of oil equivalent per day gap by the end of this decade between the potential of Shell’s current portfolio and its target to grow gas output by 1% a year while keeping oil volumes flat.
On Thursday, he said acquisitions and improvements at producing fields had “largely” filled that gap, giving Shell more time to address a remaining production gap after 2035, which he had put at 350,000 boed a year ago.
Oil prices averaged around $63 per barrel in the quarter, down from about $74 a year earlier, while European gas averaged about 30 euros per megawatt hour, down from around 43.3 euros.
(Reporting by Shadia Nasralla and Stephanie Kelly. Editing by Bernadette Baum, Mark Potter and Jan Harvey)
