{"id":741242,"date":"2026-02-04T07:12:14","date_gmt":"2026-02-04T07:12:14","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/741242\/"},"modified":"2026-02-04T07:12:14","modified_gmt":"2026-02-04T07:12:14","slug":"the-pressures-on-shell-to-beat-once-again","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/741242\/","title":{"rendered":"The pressure\u2019s on Shell to beat once again"},"content":{"rendered":"

This report is from this week’s CNBC’s UK Exchange newsletter. Like what you see? You can subscribe\u00a0here.<\/a><\/p>\n

The dispatch<\/strong><\/p>\n

It is just over three years since Wael Sawan succeeded Ben van Beurden as chief executive of Shell.<\/p>\n

While there has been much background noise, not least about a possible takeover bid for BP, a less remarked-upon\u00a0aspect of Sawan’s time at the helm to date is just how often the oil major has beaten expectations on results day.<\/p>\n

In\u00a0five of\u00a0the last eight quarters, Shell has reported\u00a0better-than-expected\u00a0earnings, most strikingly when, at the end of October last year, it\u00a0reported third-quarter earnings of $5.4 billion<\/a>\u00a0\u2014<\/strong>\u00a0comfortably ahead of the $5.1\u00a0billion that even the most bullish analysts had forecast.<\/p>\n

That may reflect nothing more than skilled expectations management.<\/p>\n

However, for a business as widely-followed in the market as Shell, beating expectations\u00a0\u2014\u00a0particularly to\u00a0this\u00a0extent\u00a0\u2014\u00a0takes some doing.<\/p>\n

And, given the precipitous\u00a0year-on-year\u00a0drop in the oil price, it highlights that Sawan has sharpened Shell’s operational performance to an extent perhaps underappreciated by the market.<\/p>\n

A Shell petrol station in London, U.K., on Wednesday, Jan. 7, 2026. <\/p>\n

Chris Ratcliffe | Bloomberg | Getty Images<\/p>\n

All of which should be borne in mind when, tomorrow,\u00a0Shell reports results for the fourth quarter of 2025 and for the year as a whole.<\/p>\n

With\u00a0Brent crude\u00a0falling almost 19% over 2025<\/a>,\u00a0and\u00a0at one point last month,\u00a0slipping below $60 a barrel for the first time in nearly five years<\/a>, headline earnings for 2025 are likely to be down by around a fifth on the previous 12 months.<\/p>\n

For the fourth quarter, they\u00a0are expected\u00a0to\u00a0be down by around 10% year-on-year;\u00a0Shell\u00a0indicated in last month’s trading update that earnings in its downstream division will be lower, its chemicals arm will report “a significant loss” and that the outcome for its energy trading business “is expected to be significantly lower” than in the third quarter.<\/p>\n

That said, Shell’s upstream business continues to offer cheer,\u00a0with\u00a0the company\u00a0saying\u00a0last month that production for the quarter will come in at between 1.84-1.94 million barrels of oil equivalent per day, compared with 1.832\u00a0million in the previous quarter. Liquified natural gas volumes should also be slightly ahead of the third quarter.<\/p>\n

Capital returns concerns<\/strong><\/p>\n

Those modest improvements, though, have not dispelled concerns about the sustainability of Shell’s capital returns\u00a0program.<\/p>\n

At each of the last two quarterly trading updates, it has announced plans to buy back $3.5\u00a0billion worth of its shares, the latest of which marked the 16th consecutive quarter in which Shell had announced $3 billion or more in buybacks.<\/p>\n

It is a performance that has marked out Shell as a best-in-class performer when it comes to capital discipline. Of its peers, only Exxon Mobil has maintained the level of its buybacks despite the decline in crude prices, with the likes of BP and Chevron reducing the pace of their buybacks last year in response to market conditions. So this will be closely watched tomorrow.<\/p>\n

Shell’s ability to keep up this pace of buybacks will in turn be affected by the extent to which it has maintained control of costs.<\/p>\n

At its capital markets day, at the end of March last year, Shell raised its cost reduction target from between $2-3\u00a0billion by the end of 2025 to a cumulative $5-7\u00a0billion by the end of 2028. It also cut its capital expenditure target, previously set at \u00a322-25\u00a0billion a year in June 2023, to $20-22\u00a0billion between 2025 and 2028.<\/p>\n

It would be startling indeed were the company to fall short of these targets, so soon after having set them, which is another reason to feel relatively optimistic on the prospect for buybacks.<\/p>\n

As interesting will be what Sawan says about where Shell is deploying capital. Reuters reported last month the company may\u00a0sell its Vaca Muerta shale oil and gas assets in Argentina’s Neuquen basin<\/a>, where production costs are higher than comparable U.S. assets, potentially raising several billion dollars. Such a move would be in keeping with Sawan’s gradual reshaping of Shell’s portfolio which has also seen it divest assets such as an LNG project in Argentina and, as has been well documented, some renewables projects.<\/p>\n

One part of the world where Shell is notably more enthusiastic, though, is Nigeria. Sawan was in the country two weeks ago and met the president, Bola Tinubu, at the latter’s official residence in Abuja. <\/p>\n

There, he highlighted Shell’s recent investments in the country, including $5\u00a0billion in the Bonga North deepwater project 120 kilometres off the Nigerian coast and $2\u00a0billion in the HI [CORR] gas field. He indicated that Shell and its partners were also advancing plans for the nearby Bonga Southwest project, which could see up to $20\u00a0billion deployed in what would be one of the world’s biggest energy projects.<\/p>\n

This newfound enthusiasm marks a significant change from Shell’s recent sentiment towards Nigeria over the last decade or so.<\/p>\n

BP chatter<\/strong><\/p>\n

One topic Sawan will be keen to avoid is BP.\u00a0Shell officially ruled out a move<\/a>\u00a0on its smaller rival in June last year that, under U.K. takeover rules, prevented it from making an offer for the next six months. That period ended on Boxing Day,\u00a0but Shell’s thinking is unlikely to have changed\u00a0\u2014\u00a0<\/strong>not least because BP’s share price has rallied by 25% since Shell ruled out an offer. The Financial Times reported seven weeks ago that Greg Gut, Shell’s former head of mergers and acquisitions and the key proponent of a BP takeover, had\u00a0left the company prior to the no-bid announcement<\/a>.<\/p>\n

A question that may be harder to ignore is whether Shell is contemplating moving its main stock listing to New York. Despite delivering a superior financial performance to Chevron over the last two years, Shell has been unable to close the gap in stock market valuation to its U.S. rival, something that must surely irk the intensely competitive Sawan.<\/p>\n

It would not be a surprise were this eventually to come to pass\u00a0\u2014<\/strong>\u00a0delivering a huge blow to the City of London’s prestige in the process.<\/p>\n

Top TV picks on CNBC\"UK's<\/p>\n

Astrid Nordin, Lau Chair of Chinese international relations at King’s College London, says recent visits by Western leaders to China are a boost for the country, as it signals the importance of Beijing in the global economy despite threats of retaliation from U.S. President Donald Trump.<\/p>\n

\"Expect<\/p>\n

Deborah Elms, head of trade policy at the Hinrich Foundation, says it’s businesses and governments that will likely collaborate via bilateral “mini arrangements” in 2026. <\/p>\n

Need to know<\/strong><\/p>\n

Britain and China rush to forge business deals<\/strong>, as a diplomatic thaw takes hold after Prime Minister Keir Starmer’s visit to China. While no sweeping free trade deal was reached, companies across several industries have announced major investments and partnerships<\/a> aimed at deepening the commercial ties.<\/p>\n

‘Very dangerous’ for the UK to do business with China, Trump warns.<\/strong> His comments<\/a> on Thursday followed Starmer’s 4-day visit to China last week, the first trip by a British prime minister in eight years. After years of strained relations, China and the U.K. are looking to\u00a0develop a long-term strategic partnership<\/a>.\u00a0<\/p>\n

Is ‘America First’ starting to backfire as Washington’s allies go it alone? <\/strong>Nations and power blocs are forging ties<\/a>, sidelining a more hostile U.S. They include China’s “preliminary agreement<\/a>” with Canada and\u00a0rapprochement with the U.K.<\/a>, as well as the EU’s agreements with\u00a0India<\/a>\u00a0and\u00a0South American countries<\/a>.<\/p>\n

\u2014 Holly Ellyatt<\/p>\n

Quote of the week<\/p>\n

The U.S. is looking increasingly like an unstable and unreliable partner. I think it was always imperative for the U.K. to have good relations with China in many people’s minds, but this is now looking even more so given the volatility.<\/p>\n

\u2014 Professor Astrid Nordin, Lau Chair of Chinese International Relations, King’s College London<\/p>\n

In the markets<\/p>\n

The FTSE 100<\/a> moved higher over the past week, reaching 10,314.59 on Tuesday, up from 10,154.43 last Wednesday. However, Britain’s blue-chip share index closed Tuesday’s session down 0.26%. <\/p>\n

The pound<\/a>, meanwhile, fell against the dollar, with sterling trading at $1.3697 against the greenback on Tuesday, down from $1.3805 a week ago. <\/p>\n

Yields on the U.K. government’s benchmark 10-year bonds \u2014 also known as gilts<\/a> \u2014 fell slightly to 4.512% from 4.539% last week.<\/p>\n

Stock Chart IconStock chart icon\"hide<\/p>\n

The performance of the Financial Times Stock Exchange 100 Index over the past year.<\/p>\n

\u2014 Hugh Leask<\/p>\n

Coming up<\/p>\n

Feb. 5: Bank of England rate decision
Feb. 6: Halifax house price index for January
Feb. 10: BRC retail sales data for January<\/p>\n","protected":false},"excerpt":{"rendered":"This report is from this week’s CNBC’s UK Exchange newsletter. Like what you see? You can subscribe\u00a0here. The…\n","protected":false},"author":2,"featured_media":741243,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5018,3,4],"tags":[20935,748,84818,3085,1395,136239,32,393,1880,31986,4884,1144,130398,712,12738,16,15,49,116469,1764,136238],"class_list":{"0":"post-741242","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-britain","8":"category-uk","9":"category-united-kingdom","10":"tag-bp-plc","11":"tag-britain","12":"tag-british-10-year-gilt","13":"tag-business-news","14":"tag-china","15":"tag-cristiano-amon","16":"tag-donald-trump","17":"tag-england","18":"tag-ftse-100","19":"tag-gbp-usd","20":"tag-great-britain","21":"tag-northern-ireland","22":"tag-perella-weinberg-partners","23":"tag-scotland","24":"tag-shell-plc","25":"tag-uk","26":"tag-united-kingdom","27":"tag-united-states","28":"tag-wael-sawan","29":"tag-wales","30":"tag-walter-isaacson"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/116011122603917873","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/741242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=741242"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/741242\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/741243"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=741242"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=741242"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=741242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}