- Q1 earnings top forecasts
- 14 quarters of at least $3 billion in buybacks
- But net debt ticks higher
Shell (SHEL) and BP (BP.) are both finding life difficult at the moment due to slumping commodity prices, a weak outlook for oil markets and the uncertainties stoked by the US Administration’s trade tariffs.
Shares in the former bounced 3.5% to £25.15 in early dealings on 2 May after the energy giant’s first-quarter profits proved better-than-feared.
Shell also signalled confidence in its resilience by launching another $3.5 billion (£2.6 billion) buyback for the next 3 months.
This marks a 14th consecutive quarter of at least $3 billion in buybacks from the company, which also left the quarterly dividend unchanged at $0.3580.
Q1 BEAT
Adjusted earnings fell 28% year-on-year to $5.6 billion on weaker oil prices for the quarter to March 2025, but the result topped the $5.1 billion consensus estimate and earnings were above the $3.7 billion generated in last year’s fourth quarter thanks to lower exploration well write-offs.
The Anglo-Dutch oil major delivered robust results across all business segments including a forecast-beating turn from the upstream division, which includes exploration and extraction of crude oil, natural gas and natural gas liquids.
During the quarter, Shell was impacted by a $509 million charge related to the UK energy profits levy, while quarter-end net debt was $41.5 billion, up from $38.8 billion at the end of 2024.
WHAT DID SAWAN SAY?
Under the stewardship of CEO Wael Sawan, Shell continues to execute its strategy of portfolio rationalisation, cost discipline and operational improvements, leaving it well placed to cope with ongoing oil price volatility and geopolitical uncertainties.
Sawan insisted his charge had delivered ‘another solid set of results’ in the quarter, during which it ‘further strengthened our leading LNG business by completing the acquisition of Pavilion Energy, and high-graded our portfolio with the completion of the Nigeria onshore and the Singapore Energy and Chemicals Park divestments.’
Sawan insisted Shell’s ‘strong performance and resilient balance sheet give us the confidence to commence another $3.5 billion of buybacks for the next three months, consistent with the strategic direction we set out at our Capital Markets Day in March.’
CAUSE FOR CONCERN
AJ Bell investment director Russ Mould said Shell, which pivoted towards natural gas more than a decade ago, ‘continues to see benefits from this strategy with its integrated gas division delivering a robust showing. Gas could have a significant role to play as the world looks to wean itself off more polluting fuels like coal and oil.’
Mould added that the loss chalked up by the renewables and energy solutions arm shows why Sawan is keen to prioritise other areas of the business where Shell can.
‘Where investors may feel some concern is over lower levels of cash flow and an uptick in net debt – particularly given this quarter does not reflect the more pronounced slump in oil prices seen since Liberation Day,’ continued Mould.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
