Shell reports strong cash flow despite lower Q4 2024 earnings, boosts dividends and buybacks

Shell plc reported a decline in quarterly earnings for the fourth quarter of 2024, reflecting the impact of lower oil and gas prices, weaker refining margins, and increased exploration write-offs. Despite these challenges, Shell’s cash flow remained strong, allowing the company to raise its dividend by 4% and launch a $3.5 billion share buyback programme.

The company’s financial resilience is evident in its cash flow from operations (CFFO), which reached $13.2 billion in Q4 2024 and $54.7 billion for the full year. Shell distributed $22.6 billion to shareholders, representing 41% of its annual CFFO, reaffirming its commitment to shareholder returns despite market volatility.

Shell’s Chief Executive Officer, Wael Sawan, emphasized the company’s ability to navigate uncertain energy markets, stating that despite lower earnings this quarter, cash delivery remained solid, generating free cash flow of $40 billion across the year. He highlighted that the company’s focus on simplification had resulted in over $3 billion in cost reductions since 2022, meeting the target ahead of schedule.

What led to the decline in Shell’s Q4 2024 earnings?

Shell’s adjusted earnings for Q4 2024 fell to $3.7 billion, compared to $6 billion in the previous quarter. The decline was largely driven by lower commodity prices, the expiration of LNG hedging contracts, and weaker margins in its refining and chemicals segments. Oil and gas revenue took a hit as global oil prices dropped from $75 per barrel in Q3 to $71 in Q4. LNG liquefaction volumes fell from 7.5 million tonnes in Q3 to 7.1 million tonnes in Q4, due to lower feedgas supply and scheduled maintenance shutdowns.

Chemicals and refining margins remained weak, with Shell reporting a net loss of $229 million in its Chemicals & Products division, impacted by lower trading contributions and industry-wide challenges. Despite these setbacks, Shell’s integrated gas and upstream segments helped offset some losses. The company’s gas segment generated $2.2 billion in adjusted earnings, driven by higher realised gas prices, while upstream production rose to 1,332 thousand barrels of oil equivalent per day (kboe/d), reflecting new production from major projects such as Mero-3 and Whale.

Why is Shell increasing dividends and share buybacks?

Despite lower Q4 profits, Shell’s strong free cash flow generation has allowed it to return more capital to investors. The company announced a 4% increase in its quarterly dividend, raising it to $0.358 per share. Additionally, Shell launched a $3.5 billion share repurchase programme, set to be completed before its Q1 2025 earnings announcement. These measures align with Shell’s long-term capital allocation strategy, which prioritizes shareholder distributions while maintaining financial strength. With over $40 billion in free cash flow generated in 2024, the company remains confident in its ability to balance investments in future energy projects with shareholder returns.

How is Shell managing its capital expenditure and debt?

Shell has maintained a disciplined approach to capital spending, with cash capital expenditure (capex) totaling $21.1 billion for 2024, lower than the previous year. The company expects 2025 capex to remain below 2024 levels, reinforcing its commitment to cost efficiency and financial discipline.

Meanwhile, net debt increased to $38.8 billion in Q4 2024, up by $3.6 billion. This rise was partly due to the recognition of the LNG Canada pipeline lease liability. Despite the quarter-on-quarter increase, Shell’s net debt was still $4.7 billion lower compared to the beginning of 2024, highlighting improvements in balance sheet strength.

What’s next for Shell’s renewables and energy solutions?

Shell is continuing its strategic push into renewables and energy solutions, with a renewable power generation capacity of 7.4 GW as of Q4 2024. The company’s latest acquisition—a 609 MW gas-fired power plant in Rhode Island, USA—signals its continued investment in low-carbon energy infrastructure. However, the segment reported a $311 million loss in Q4, mainly due to one-time tax charges and weaker trading margins. Shell remains focused on expanding its low-carbon business, including investments in hydrogen production, carbon capture projects, and nature-based carbon offset initiatives.

What is Shell’s financial outlook for 2025?

Looking ahead, Shell is set to outline its long-term financial and strategic plans during its Capital Markets Day in March 2025. Key areas of focus will include oil and gas production targets amid evolving market conditions, investment priorities in renewables and LNG expansion projects, and cost reduction strategies to enhance profitability in a lower-price environment.

Investors will closely monitor upcoming financial updates, including Shell’s LNG Outlook 2025 on February 25, 2025, and Q1 2025 earnings release on May 2, 2025, to gauge the company’s trajectory in an increasingly complex energy landscape.

Shell’s Q4 2024 performance underscores the resilience of its financial model, with strong cash flow supporting dividend growth and share buybacks despite a challenging pricing environment. While lower oil and gas revenue and weaker refining margins weighed on earnings, the company’s focus on cost efficiency, disciplined capex, and shareholder returns has reinforced investor confidence.

As Shell transitions towards a lower-carbon future, its ability to balance traditional energy investments with renewable expansion will be critical in shaping its long-term success. Investors and industry stakeholders will be watching closely as the company navigates the shifting energy market in 2025 and beyond.