London: Shell reported a sharp drop in fourth-quarter profits, missing analyst estimates due to weak refining margins and LNG trading challenges. However, the energy giant announced a $3.5 billion share buyback and a 4% dividend increase, aiming to reassure investors.
Profit Misses Expectations
Shell’s adjusted earnings (net profit) for Q4 2024 stood at $3.66 billion, a significant drop from $7.31 billion in the same period last year. Analysts polled by Vara Research had expected $4.09 billion.
For the full year, Shell’s profit fell 16% to $23.72 billion, reflecting a broader industry trend of declining oil and gas earnings after record highs in 2022-23.
Refining Struggles & LNG Disputes
- Shell’s refining division posted a $229 million loss, compared to a $29 million profit a year ago.
- Global refining margins weakened due to lower economic activity and new refineries in Asia and Africa.
- Refinery utilization was 76% in Q4, with plans to increase it to 80-88% in Q1 2025.
- LNG supply disputes with Venture Global continue, with no set timeline for arbitration. Shell, BP, and Edison are contesting missed contracted cargoes from Venture Global’s Calcasieu Pass facility, forcing them to buy expensive spot cargoes instead.
CEO Faces Pressure as Strategy Shifts
CEO Wael Sawan has been cutting costs and refocusing on core oil, gas, and biofuels, moving away from renewables. Shell also plans to reduce capital expenditure below 2024’s $21 billion, with further details expected at March’s capital markets day.
Market Reaction
- Shell’s stock rose 0.25% in morning trading, in line with the FTSE 100 index.
- Investors remain cautious as oil demand weakens and energy prices stabilize.
Shell’s strategic shift, cost-cutting measures, and investor returns will be closely watched as the company navigates a turbulent energy market in 2025.
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