Shell: Stock of the Week

VIDEO: Shell beat analyst expectations with profits of over $28 billion driven by increased demand for liquefied natural gas

Christopher Johnson 1 February, 2024 | 3:13PM
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Christopher Johnson: Welcome to Stock of the Week. My name is Christopher Johnson, Data Journalist at Morningstar UK. British oil giant Shell has just announced higher-than- anticipated full-year profits for 2023.

Europe's largest oil and gas company reported adjusted earnings of $28.25 billion, beating analyst expectations that it would reach $27.5 billion. Although, the final figure is a 29% drop from its whopping 2022 full year profit of almost $40 billion, it is still higher than any other year since 2011.  

In its annual report, Shell increased its dividend by 4% and it has announced the commencement of a $3.5 billion share buyback program over the next three months. The oil and gas behemoth also saw strong adjusted earnings for the final quarter of 2023 raking in $7.31 billion, although a decrease from the $9.81 billion it recorded a year earlier.  

Shell owed much of its positive returns to the trading of liquefied natural gas, which many European countries used as a lifeline after Russia cut off the continent from its natural gas supplies. But it blamed a fall in profits on lower oil and gas prices, muted volumes being traded, as well as smaller margins for the refining of crude oil. 

Shell benefited from the price of oil and gas surging after the end of Covid lockdowns and Russia’s invasion of Ukraine. Brent crude oil traded at around $128 a barrel following the invasion in March 2022 but has since dropped and is currently trading at about $80. 

The report highlighted Shell’s chemicals unit as the worst performing part of the business, with adjusted earnings falling from $1.38 billion in the third quarter of 2023 to a measly $83 million in the last three months of the year. 

Its renewables and energy solutions division also saw limited adjusted earnings of $155 million, with Shell stating it will scale back this part of the business to focus on boosting returns for shareholders.  

Shell is currently trading at £25.15 a 2.78% increase as of 10:13am.

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Christopher Johnson  is data journalist at Morningstar

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