Shell announced a $28 billion profit for 2023, a 30% decrease from the prior year, amidst cooling energy demand and prices. Despite the drop, the company raised its dividend by 4% and continued share buybacks. The energy giant’s shareholder payouts 2023 amounted to $23 billion, reflecting over 10% of its market value, underscoring the investment community’s emphasis on returns amid the uncertain future of fossil fuels.
Profit declines in 2023 were attributed to diminished margins in chemicals and refining, alongside slower fuel sales due to tepid global economic growth, following an exceptional 2022 driven by a spike in energy prices post-Russia’s Ukraine invasion.
Ending the year strongly, Shell’s fourth-quarter adjusted earnings reached $7.3 billion, surpassing the anticipated $6 billion, although this decreased from the previous year’s $9.8 billion. The quarter’s robust liquefied natural gas (LNG) trading outcomes partly mitigated weaker refining and oil trading performances despite a $500 million loss in chemicals.
Bernstein analysts highlighted that LNG trading contributed $3.5 billion to profits, marking a record high. CEO Wael Sawan emphasized ongoing organizational simplification towards enhancing value with reduced emissions as 2024 begins. Shell shares saw a 2.5% increase, outperforming competitors with an 8% rise over the past year.
Shell will disclose its full-year results for 2023 before Exxon Mobil and Chevron, with BP and TotalEnergies to follow. The company has raised its dividend to $0.344 per share, marking a 20% annual increase and the seventh hike since the COVID-19 pandemic-induced dividend reduction.
Additionally, Shell plans to repurchase $3.5 billion in shares over the next three months, continuing the previous quarter’s pace. Shareholder distributions in 2023 reached $23 billion, exceeding 40% of its operational cash flow.
However, Shell’s fourth-quarter free cash flow dipped to $7 billion, the lowest in 2023 and significantly below the prior year’s $15.5 billion, signalling potential concerns.
Shell faced $5.5 billion in pretax impairment charges due to value reductions in various global operations. Assuming leadership in January 2023, Sawan pledged to refocus Shell on higher-margin projects, maintaining steady oil production and boosting natural gas output. This strategic shift includes company-wide staff reductions, aiming for up to $3 billion in savings and reducing annual costs by $1 billion, as reported by CFO Sinead Gorman.
With 2023 capital expenditures at $24.4 billion, Shell forecasts spending between $22 billion and $25 billion in the upcoming year, anticipating increased LNG production volumes in the first quarter of 2024 after restarting Australia’s Prelude floating LNG facility.
