Shell rises on $3.5B buyback despite earnings miss
Shareholder returns override quarterly profit shortfall as energy giant maintains capital discipline
Shell shares rose 1.5% in early London trading on Thursday as investors welcomed a $3.5 billion share buyback program and dividend increase, brushing aside a quarterly earnings miss that highlighted ongoing challenges in the energy market.
The Anglo-Dutch energy giant reported fourth-quarter adjusted earnings of $3.26 billion, falling short of analyst estimates of $3.5 billion and declining from $3.7 billion during the same period last year. Despite the shortfall, the stock climbed to $78.79 as markets focused on the company's continued commitment to shareholder returns amid softer trading conditions.
According to the company's results announcement, full-year income attributable to shareholders increased 11% to $17.84 billion, though adjusted earnings for the year declined 22% to $18.53 billion. The divergent performance reflects one-time gains and accounting adjustments that bolstered net income even as core operating earnings faced pressure from lower commodity prices and trading volatility.
The earnings decline was driven primarily by weaker performance in Shell's Integrated Gas division, where adjusted earnings fell 30% to $8.02 billion for the full year. The segment faced headwinds from lower contributions from trading and optimization, reduced realized prices, and higher depreciation costs. LNG sales volumes, however, proved resilient, increasing 11% to 72.94 million tonnes.
Upstream operations also struggled, with adjusted earnings slipping 11% to $7.44 billion, reflecting lower realized liquids prices and unfavorable gas storage effects. The company's Chemicals and Products segment suffered the steepest decline, with earnings plunging 64% to $1.05 billion as margins in both products and chemicals contracted.
Shell announced it would repurchase $3.5 billion of shares before its first-quarter results, matching the size of its previous buyback program. The company also raised its fourth-quarter dividend by 4% to $0.372 per share, bringing the full-year dividend to $1.446, up from $1.390 in 2024.
"The company highlighted its continued focus on performance, discipline, and simplification, which contributed to the structural cost reductions," according to the earnings release. Shell has achieved $5.1 billion in pre-tax structural cost reductions since 2022, including $2 billion delivered during 2025.
One bright spot was the Renewables and Energy Solutions division, which swung to a profit of $172 million from a loss of $497 million in 2024. The improvement was driven by lower operating expenses and higher margins from generation and energy marketing. Renewable power generation capacity in operation increased 24% to 4.2 gigawatts.
The company made several strategic investments during the year, including final investment decisions on the Gorgon Stage 3 development in Australia and the HI gas project offshore Nigeria. Shell also combined its UK offshore oil and gas operations with Equinor ASA to form Adura, a 50/50 joint venture, and completed a deal to exit oil sands activities by exchanging mining interests for additional stake in the Scotford upgrader and Quest Carbon Capture facility.
Net debt increased to $45.69 billion at year-end from $38.81 billion in 2024, pushing the company's gearing ratio to 20.7% from 17.7%. The company attributed the debt increase to share buybacks, cash dividends, lease additions, and interest payments more than offsetting free cash flow, which declined significantly to $26.05 billion from $39.53 billion in 2024.
Looking ahead to 2026, Shell forecast capital expenditure of $20 billion to $22 billion for the full year. The company provided guidance for Integrated Gas production between 920,000 to 980,000 barrels of oil equivalent per day and LNG liquefaction volumes between 7.4 to 8.0 million tonnes. Upstream production is projected at 1.7 million to 1.9 million barrels of oil equivalent per day.
Analysts maintain a positive outlook on the stock, with a consensus "Buy" rating and an average price target of $81.61, according to market data. Shell's market capitalization stands at $219.9 billion, with shares trading at 15.84 times trailing earnings.
The stock's resilience following the earnings miss reflects investor confidence in Shell's ability to navigate a challenging commodity price environment while continuing to deliver returns to shareholders through a combination of dividends and buybacks. The company's disciplined approach to capital allocation and operational efficiency improvements appear to be offsetting concerns about near-term earnings pressure.