Shell on Thursday reported a 2023 profit of $28 billion, a 30% drop from the previous year's record as energy prices and demand cooled, but still allowing the firm to increase its dividend by 4% and extend share repurchases.
The British company's payouts to shareholders reached around $23 billion in 2023, over 10% of Shell's market value, highlighting investors' focus on returns as the sector grapples with an uncertain outlook for fossil fuels.
Shell's 2023 profits were marked by lower chemicals and refining profit margins and slower fuel sales amid sluggish global economic activity following a blockbuster 2022 fueled by a surge in energy prices after Russia's invasion of Ukraine.
Shell ended the year on a strong note, posting fourth-quarter adjusted earnings, its definition of net profit, of $7.3 billion, exceeding analysts' expectations of $6 billion profit but down from a record $9.8 billion a year earlier.
Strong liquefied natural gas (LNG) trading results in the quarter helped offset weaker refining and oil trading results, while chemicals posted a loss of $500 million.
Analysts at Bernstein estimated that LNG trading accounted for $3.5 billion of profits, the highest ever.
"As we enter 2024 we are continuing to simplify our organisation with a focus on delivering more value with less emissions," Chief Executive Officer Wael Sawan said.
Shell's shares were up 2.5% at 0945 GMT. Its shares have outperformed rivals over the past year, rising by over 8%.
Growing Returns
Shell is the first major energy company to report 2023 full year results. Exxon Mobil and Chevron will report on Friday, followed by BP and TotalEnergies next week.
Shell increased its dividend by 4% from the previous quarter to $0.344 per share, a 20% increase on an annual basis. It is the seventh increase since its historic dividend cut in the wake of the COVID-19 pandemic.
The British company also announced the repurchase of a further $3.5 billion of its shares over the next three months, a similar rate to the previous three months.
Shareholder distributions in 2023 reached around $23 billion, over 40% of its cash flow from operations.
But in a worrying sign for the firm, Shell's free cash flow, or excess money after investment, fell to $7 billion in the fourth quarter, the lowest in 2023 and less than half the previous year's $15.5 billion.
Lower Costs
Shell took pretax impairment charges of $5.5 billion, with $2.5 billion due to reducing the value of its chemicals business in Singapore, $1.2 billion due to revisions of oil and gas operations in Nigeria, Britain and North America, and $873 million due mostly to revisions of LNG production estimates in Australia.
Sawan, who took the helm in January 2023, vowed to revamp Shell's strategy to focus on higher-margin projects, steady oil output and increase natural gas production.
As part of the strategy, Shell has started company-wide staff reductions, including in its low-carbon solutions division, in a drive to save up to $3 billion.
Shell reduced annual costs by $1 billion over the past year, Chief Financial Officer Sinead Gorman told reporters.
Shell's capital expenditure reached $24.4 billion in 2023 and is expected to range from $22 billion to $25 billion this year.
It increased its forecast for LNG production volumes for the first quarter of 2024 following the restart of its giant Prelude floating LNG facility offshore Australia.
(Reuters - Reporting by Ron BoussoEditing by Lincoln Feast, Ros Russell and Mark Potter)