London24NEWS

Shell arms money to buyers as weaker oil demand hits earnings

  • Shell revealed adjusted earnings fell by 16% to $23.7bn (£19.1bn) in 2024
  • Earnings plunged between the third and fourth quarters by 39% to $3.7bn

Shell has announced a dividend hike and another large share buyback programme after weaker oil demand weighed on fourth-quarter profits. 

It comes at a time when the energy giant is refocusing efforts back in favour of oil and gas production, and away from renewables, under the direction of chief executive Wael Sawan. 

Oil and gas production has proved extremely profitable in recent years as geopolitical upheaval and extremely high levels of energy demand have kept prices high.  

But the FTSE 100 group’s adjusted earnings fell by 16 per cent to $23.7billion (£19.1billion) in 2024, on the back of lower prices and refining margins.

Earnings plunged between the third and fourth quarters by 39 per cent to $3.7billion, about 10 per cent below analysts’ estimates, as the group declared higher exploration write-offs in its upstream division.

Net debts also increased over the period by about $3.7billion to $38.8billion, although they still fell by around $4.7billion during the year. 

But Europe’s biggest oil company raised its dividend by 4 per cent for the quarter, taking its annual dividend to $1.39 per share, a 7 per cent increase on the previous year.

Shell also intends to repurchase another $3.5billion of its shares over the coming three months.

Shell shares were 0.7 per cent higher at £26.13 on Thursday morning and have risen by around 31 per cent over the past five years.

Generous: Shell has announced a dividend hike and another large share buyback programme

Generous: Shell has announced a dividend hike and another large share buyback programme 

The group also achieved its target to cut $3billion (£2.4billion) of costs over the year, partly by axing jobs in its chemicals and low-carbon businesses.

Finding the right balance on fossil fuels 

Last year, Shell said it would no longer start any new offshore wind projects and watered down emissions reduction goals.

This included abandoning a goal to lower the net carbon intensity of its products by 45 per cent by 2035.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: ‘Shell remains at a crossroads, torn between the seemingly inevitable pull of the energy transition and the demands of shareholders.

‘Its financial strength gives it the firepower to invest for the future as well as make generous distributions, but there are still some major doubts as to how the company plans to adapt to changing shifts in the energy mix.’

Fellow oil giant BP has likewise rowed back on its green energy investments in favour of fossil fuels, partly to revive investor confidence.

It has suspended all new offshore wind projects and reportedly discarded a prior target to cut oil and gas output by 2030.

In August, the London-based firm signed a memorandum of understanding with the Iraqi Government to develop the Kirkuk oilfield.

Brent Crude prices averaged $81 per barrel in 2024, compared to $82/bl the previous year, as sluggish demand in China and delays to production increases by OPEC+ kept prices relatively stable.

Mark Crouch, market analyst at eToro, said: ‘With Donald Trump calling for ‘drill baby drill’, oil majors like Shell currently have very little incentive to dance to the President’s tune.

‘Shell instead is opting to increase share buybacks, rather than invest in new drilling projects. So until oil prices increase or more incentives are on offer, perhaps ‘drill maybe drill’ would be more accurate for the time being.’

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