Shell Profits Drop 29% in 2023 But Still Beat Expectations

Manoj Prasad

Oil and gas titan Royal Dutch Shell reported a 29% annual decline in adjusted earnings on Thursday, raking in $28.25 billion in 2023 profits. Though down from the record $39.9 billion Shell netted last year during an energy crisis, results beat analyst forecasts.

Shell rewarded shareholders by hiking dividends and unveiling a new $3.5 billion share buyback scheme.

Shell’s adjusted earnings of $7.31 billion in Q4 topped estimates despite headwinds like weaker refining margins. Liquefied natural gas trading was a bright spot. With Brent crude averaging $83 per barrel last quarter amid volatile geopolitics, Shell generated ample cash flow to raise payouts.

Here are the key numbers and takeaways from Shell’s latest quarterly report:

  • Q4 Adjusted Earnings: $7.31 billion, beating expectations
  • Annual Earnings: $28.25 billion, down 29% year-over-year
  • Q4 Dividend Hike: 4% boost to $0.288 per share
  • New Buyback Program: Additional $3.5 billion over 3 months
  • CEO Comment: “Pleased with progress but more to go”

The Q4 dividend hike marks Shell’s second increase in 2023 as profits remained resilient despite lower oil prices. Shell has now raised payouts for the last 8 quarters straight. The new $3.5 billion buyback also comes right after Shell completed a separate $3.5 billion in share repurchases.

Shell CEO Wael Sawan cited “strong operational delivery” in 2022 during volatile markets. And with Brent recently topping $80 per barrel again, Shell seems ready to keep rewarding shareholders.

Balancing Shareholder Returns and Low-Carbon Investment

Sawan noted Shell’s focus remains on rewarding shareholders, cutting debt, and transitioning to net-zero carbon emissions by 2050.

Last year Shell spent $5.6 billion on low-carbon energy projects – part of a delicate balancing act between fossil fuels funding today’s dividends and cleaner energy delivering prosperity down the line.

But does Shell allocate enough capital to renewables? Critics contend bigger investments in wind, solar, biofuels and hydrogen are needed to hit ambitious green targets.

Sawan countered that Shell must play to its “competitive strengths” in clean power while delivering affordable, reliable energy during a transition that will take decades more. This strategy appeases both ESG-focused investors and those seeking income.

What’s Next for Shell

With Brent regaining $80 and geopolitical tensions still simmering, Shell seems capable of posting strong numbers in 2023 despite last year’s profit decline. Volatility and elevated prices could become the norm, playing right into Big Oil’s hands.

Shell expects to dish out $18 to $22 billion more in shareholder payouts over the next 18 months, funded by asset sales and operational performance.

So investors will keep reaping rewards as Shell works to quicken the pace of its green pivot. But with Big Oil earnings season just starting, Shell still faces intense competition from rivals like Exxon and BP.

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