By Christian Moess Laursen
Shell’s annual profits fell last year, although by less than the market had expected, as the European energy sector grapples with lower oil and gas prices and weaker refining margins.
Still, the London-based energy giant said Thursday that it would buy back $3.5 billion in shares this quarter and hiked its fourth-quarter dividend by 20% to 34.40 cents a share, in line with its promise of lofty shareholder returns despite slipping commodity prices.
The oil-and-gas major posted $20.28 billion in full-year profit measured on a net current-cost-of-supplies basis–a metric similar to the net income that U.S. oil companies report. This compares with $41.56 billion in 2022 when oil and gas prices soared after Russian invaded Ukraine.
For the fourth quarter, Shell’s profit on a net current-cost-of-supplies basis dropped to $1.38 billion from $6.15 billion in the preceding three-month period, reflecting lower refining margins, margins from crude and oil products trading, and higher operating expenses.
However, adjusted fourth-quarter earnings–which strip out certain commodity-price adjustments and one-time charges–rose to $7.31 billion from $6.22 billion in the third quarter, beating a consensus forecast of $6.04 billion, based on a poll of 24 analysts compiled by Vara Research. The increase was driven by higher trading gains from liquefied natural gas, favorable tax movements, and higher production, Shell said.
Market watchers had expected a dip in quarterly earnings, forecasting results across the integrated energy sector to have been hit by lower oil prices and refining margins.
But despite the weaker market environment, Shell’s key integrated-gas unit, which includes its leading LNG business, posted adjusted fourth-quarter earnings of $3.96 billion, up from $2.53 billion in the preceding three months.
“As we enter 2024 we are continuing to simplify our organization with a focus on delivering more value with less emissions,” Chief Executive Wael Sawan said.
The company, the second-biggest by market cap on the FTSE 100 index, also booked a $3.9 billion impairment charge, dragging quarterly net profits, which fell to $474 million from $7.04 billion. This was flagged by the company in January.
Cash flow from operations–a measure of the cash a company generates from normal business operations–rose to $12.575 billion in the quarter, topping a consensus forecast of $11.59 billion, from $12.33 billion in the third quarter.
During the fourth quarter, Shell–Europe’s biggest integrated oil company–produced 901,000 oil-equivalent barrels a day, in line with its targeted range, and 7.1 million metric tons of LNG, likewise in line with its guidance.
Upstream production–the extraction of crude oil and natural gas–also met the targeted range at 1.87 million BOE a day.
For the current quarter, Shell expects an output between 930,000 and 990,000 BOE a day of integrated gas, 7.0 million-7.6 million tons of LNG and an upstream production of 1.73 million-1.93 million BOE a day.
Write to Christian Moess Laursen at christian.moess@wsj.com
