Shell buyback cushions profit miss as analysts raise questions on cash use Proactive uses images sourced from Shutterstock
Shell PLC shares were relatively steady, down 0.85% at 2,843.5p, after the oil major missed earnings expectations for the fourth quarter but held the line on shareholder payouts, announcing a fresh $3.5 billion buyback and a 4% dividend increase.
Adjusted earnings fell short of forecasts at $3.3 billion, around 7% below consensus. Operating cash flow before working capital was also weaker than expected at $8.2 billion.
UBS analyst Joshua Stone said the miss was driven by several charges below the line, including non-cash deferred tax adjustments, and noted that Shell’s capital allocation will be under scrutiny.
“The key question from here is likely to revolve around use of cash and the company’s preparedness to lean into the balance sheet to sustain distributions,” he said.
Shell’s net debt rose 11% quarter-on-quarter to $45.7 billion, with debt to equity gearing increasing to 20.7%. The group maintained capital expenditure guidance at $20-22 billion for 2026.
Derren Nathan at Hargreaves Lansdown warned that rising debt might raise questions about the sustainability of buybacks if the trend continues, but Shell’s balance sheet remained strong by sector standards.
Panmure Liberum’s Ashley Kelty described the results as “not unexpected” but said the miss across most metrics would still be disappointing for investors.
“Marketing revenues tumbled 38% and production dipped slightly to 2.81 million barrels of oil equivalent per day. The poor performance was well flagged, but earnings season isn’t going to be much fun for the majors,” he said.
Shell’s upstream and LNG segments posted solid volumes, but profitability was hit by softer commodity prices and lower margins across downstream and trading.
Analyst Neil Shah at Edison Group struck a more optimistic tone, highlighting that Shell’s ability to support distributions despite weaker trading conditions and falling prices was the key for most investors.
“Structural cost reductions remain a key positive,” he said, noting cumulative savings of $5.1 billion since 2022.
“While earnings remain sensitive to commodity price volatility, ongoing cost savings, portfolio optimisation and growth in LNG and trading activities position the group to sustain cash generation and long term returns.”