On Thursday, Shell (NYSE:SHEL) announced a robust profit of $28 billion for the year 2023, surpassing fourth-quarter earnings expectations due to strong performance in liquefied natural gas (LNG) trading. The substantial profit allowed the energy giant to enhance its dividend and extend its share repurchase program.
While the annual profit represented a 30% decrease compared to the record set in the previous year, marked by lower chemicals and refining profit margins, and slower fuel sales amid a global economic slowdown, it demonstrated resilience following the energy price surge in 2022, driven by Russia’s invasion of Ukraine.
In response to the positive financial performance, Shell increased its fourth-quarter dividend by 4% and announced plans to repurchase an additional $3.5 billion of its shares over the next three months, maintaining a similar rate to the previous quarter. Shareholder payouts from Shell reached approximately $23 billion in 2023, accounting for over 10% of the company’s market value, emphasizing investors’ emphasis on returns amidst uncertainties surrounding fossil fuels.
Shell closed 2.4% higher after the announcement, with its shares outperforming rivals over the past year, rising by over 8%. CEO Wael Sawan, who took over in January 2023, has been focused on revamping Shell’s strategy, emphasizing higher-margin projects, stable oil output, and increased natural gas production. The company has undergone staff reductions, including in its low-carbon solutions division.
In 2023, Shell’s spending on its renewables and energy solutions division dropped by 23% from the previous year to $2.7 billion, reflecting 11% of the total capital spending, down from 14% in 2022, signaling potential shifts in priorities.
Shell reported fourth-quarter adjusted earnings of $7.3 billion, surpassing analysts’ expectations of $6 billion. The results were down from a record $9.8 billion a year earlier, with strong LNG trading helping offset weaker refining and oil trading results, while the chemicals segment posted a loss of $500 million.
The dividend was increased by 4% from the previous quarter to $0.344 per share, marking a 20% increase on an annual basis. This marks the seventh increase since Shell’s historic dividend cut in the wake of the COVID-19 pandemic. Shareholder distributions in 2023 accounted for over 40% of its cash flow from operations.
However, a concern arose as Shell’s free cash flow fell to $7 billion in the fourth quarter, the lowest in 2023 and less than half of the previous year’s $15.5 billion. Shell also took pretax impairment charges of $5.5 billion in the quarter, related to the reduction in the value of its chemicals business in Singapore, revisions of oil and gas operations in Nigeria, Britain, and North America, and adjustments to LNG production estimates in Australia.
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