Shell hikes dividend as gas trading business boosts bottom line amid turn away from renewables

The London headquartered company beat analysts’ expectations, in posting adjusted earnings worth $7.3 billion, down 26% year-on-year, compared to the $6 billion sum predicted by 24 analysts polled by Shell itself.

Shares in Shell
SHEL,
+2.72%

SHEL,
-1.53%
increased 3% on Thursday having advanced by 6% over the previous 12 months. 

Shell, meanwhile, outlined plans to to lower its investments in renewables following an underwhelming performance from its clean energy segment. Climate campaigners hit out at the company for paying out nine times more money to its shareholders than it invested in its clean energy and renewables divisions over the entirety of 2023.

Instead, the FTSE-100 giant successfully navigated turbulent global energy markets in generating $4 billion in adjusted earnings from its integrated gas business, as it capitalized on surging demand for Liquified Natural Gas by selling 18.09 million tonnes of the fuel, up 13% year on year. 

The strong performance from Shell’s integrated gas unit saw the segment beat analysts’ expectations for the division, following forecasts from 23 company watchers, polled by Shell itself, that the unit would generate just $3.5 billion in adjusted earnings. 

Shell’s bumper LNG trading performance helped it navigate plunging prices on Europe’s energy markets that saw Brent crude prices fall 18% year-on-year, to averages of $83 a barrel across 2023, and gas prices on the Netherlands’ EU TTF market plunge 68% to $13 per MMBtu. 

Gas prices on the U.S. Henry Hub in Erath, Louisiana fell 61% year on year, to $2.5 per MMBtu across 2023, while the price of Japan Crude Cocktail oil fell 9% over the same period to $89 a barrel. 

“Lower oil prices meant Shell’s full year earnings saw a substantial drop in 2023 but that’s the nature of the beast – oil company earnings are as volatile as the energy prices they are tied to,” AJ Bell analyst Jack Pattinson said. 

The oil major’s upstream segment also outstripped analysts’ forecasts, in posting adjusted earnings worth $3.1 billion, compared to estimates from 23 analysts it would make just $2.5 billion. 

Shell upped its dividend by 4% and launched another share buyback program that will see it purchase $3.5 billion in stock from its shareholders by the end of the first quarter of 2024.

The results follow Shell’s decision in June 2023 to scrap its plans to cut its production of oil and gas by 1-2% each year until 2030, in a reversal of its previous climate friendly stance following current CEO Wael Sawan’s succession in January last year.   

As CEO, Sawan, who started his career in Oman’s state-owned oil exploration company, Petroleum Development Oman, before rising the ranks of Shell, has pushed back against efforts to pivot towards clean energy in prioritizing the firm’s more lucrative oil and gas business instead. 

The turnaround follows a underwhelming performance from Shell’s renewables & energy solutions division – which includes its pipeline gas trading business as well as its clean energy ventures –  as adjusted earnings segment plunged 47% to $155 million.

Shell’s results come as the European energy giant’s main U.S. rivals Chevron
CVX,
-1.79%
and ExxonMobil
XOM,
-1.95%
are now both preparing to report their own fourth quarter results tomorrow.