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Shell has hiked its dividends to shareholders despite profits falling last year, after the energy giant was hit by weaker oil prices and lower demand for the fossil fuel – and said they are not presently looking at shifting their primary market listing overseas.
The London-listed company raised its dividend by 4 per cent while posting earnings of US$23.7bn (£19.1bn) for the calendar year, down from $28.3bn (£22.8bn) in 2023.
Shell also said it had hit a cost-cutting target of $3bn (£2.4bn) after setting the goal in 2022.
The company, which has been reported to be considering moving its stock market listing from the London Stock Exchange to the US, said it is keeping its current listing “under review”. However, chief financial officer Sinead Gorman said moving the listing is “not a live discussion for us” currently.
After a year of enormous outflows for the LSE, the biggest since the global financial crisis, keeping one of its biggest players on board will be seen as a win – but AJ Bell investment director, Russ Mould, cautioned that it could only be a for now situation.
“A strategy update in March is an opportunity for [CEO Wael] Sawan to lay out the next steps. The fear in the London market is that this update includes shifting the primary listing out of London and to the US, where Sawan could argue the investment case might get a kinder hearing,” Mould said.
Shell and BP have been trying to close valuation gaps towards similar levels that the major US-based oil players enjoy, which would come around from a bump-up in share prices. Several companies have switched UK for the US in a bid to do the same, with more exposure and liquidity in that market.
The oil giants are the second (Shell) and seventh (BP) biggest companies in the FTSE100 by market capitalisation.
Gorman added that Donald Trump’s pro-oil and gas agenda was a positive for the company as a major outside investor in the US, adding: “We welcome the president’s support for the industry that’s coming through very strongly.”
Chief executive Wael Sawan said that despite the lower earnings, Shell’s cash flow remained “solid” at $40bn (£32bn) across the year, while operating in “a lower price environment”.
“Our continued focus on simplification helped to deliver over 3 billion dollars in structural cost reductions since 2022, meeting our target ahead of schedule, whilst also making significant progress against all our other financial targets,” he said.
It comes after a year in which oil prices have steadied and demand has fallen, partly as a result of the growing popularity of electric vehicles. The oil supermajors, including US giants ExxonMobil and Chevron, have suffered falling margins in their refining businesses this year as a result.
The fossil fuel companies had made record profits in previous years after oil prices spiked during the global energy crisis.
Shell wrote that the lower income reflected less money from its liquefied natural gas trading operation and lower oil refining margins, among other factors.
Maurizio Carulli, an energy analyst at Quilter Cheviot, noted the “4 per cent dividend increase and an additional $3.5bn buyback” as “significant positives” for shareholders, while Mr. Mould added it suggests Shell are “not too worried” about the Q4 drop in profits.
However, the dividend increase has also led to renewed calls for oil companies to contribute to disaster relief funds from environmental groups.
Elena Polisano, head of Greenpeace UK’s ‘Stop Drilling, Start Paying’ campaign, said: “Shell and its shareholders again raked in tens of billions from fuelling the climate crisis last year. This resulted in destructive flooding, which fragmented communities from Wales to the Philippines, and fanned the flames of the most expensive wildfires in California’s history, leaving ordinary people to face the devastation of their communities and huge financial costs.
“The world is approaching breaking point. Oil companies like Shell are causing the climate crisis, and they have the billions necessary to fund the clean-up of homes and communities – yet they don’t pay a penny for the loss and damage they cause. The UK government must act in the interests of the people it represents and make fossil fuel companies – not taxpayers – pay for the damage caused by flooding and other climate disasters.”
Shell shares had risen by 1.16 per cent in morning trading by 11am GMT on Thursday.
Additional reporting by PA
