Shell’s $3.5B Buyback Amid 35% Q1 Profit Drop

Shell, a global energy giant, reported a 35% drop in first-quarter net profit for 2025, with profits falling to $4.8 billion from $7.4 billion a year earlier. Despite this decline, the company outperformed analyst expectations, which had forecasted lower earnings. The results, announced on May 2, 2025, reflect challenges from falling oil prices and weaker refining margins, yet Shell remains confident in its financial strategy, launching a $3.5 billion share buyback program to bolster shareholder value.

Strong Performance Despite Profit Decline

Shell’s adjusted earnings reached $5.58 billion, surpassing the $4.96 billion predicted by analysts. This resilience stems from robust operational performance across its divisions, particularly in liquefied natural gas (LNG) trading and upstream operations. Total revenue for the quarter dropped 6% to $70.2 billion, driven by softer crude prices. Brent crude, a global benchmark, averaged $75 per barrel in Q1 2025, down from $87 a year ago, impacting profitability across the energy sector.

Key Financial Highlights

The company’s integrated gas division posted adjusted earnings of $2.48 billion, up from $2.17 billion in the prior quarter. Upstream earnings also rose to $2.34 billion from $1.68 billion, reflecting efficient operations. However, the chemicals and products division saw weaker results, earning $449 million due to lower refining margins. Free cash flow fell to $5.3 billion from $9.8 billion, influenced by lower profitability and timing of payments. Net debt increased slightly to $41.52 billion, including lease additions from the Pavilion Energy acquisition.

$3.5 Billion Share Buyback Signals Confidence

Shell’s decision to initiate a $3.5 billion share buyback, the 14th consecutive quarter of at least $3 billion in repurchasing, underscores its focus on shareholder returns. CEO Wael Sawan emphasized the company’s strong balance sheet and operational momentum, stating, “These results give us confidence to commence another $3.5 billion of buybacks for the next three months.” The program aims to boost stock value amid a volatile oil market, contrasting with rival BP, which reduced its buybacks after a 70% profit drop.

Strategic Focus on LNG and Fossil Fuels

Shell continues to prioritize its core fossil fuel and LNG businesses, with plans to maintain stable oil production through 2030. The company leads the market in LNG, capitalizing on growing demand for energy independence and cleaner fuel alternatives. Its global network of 47,000 service stations also positions it to offer lower-carbon options to consumers. However, Shell recently scaled back its carbon reduction goals, adjusting its 2030 carbon intensity target to a 15-20% reduction, sparking criticism from environmental groups.

Market Response and Future Outlook

Following the earnings announcement, Shell’s shares rose over 3% on the London Stock Exchange, outperforming the broader energy index. Investors appear encouraged by the company’s financial discipline and consistent buyback strategy. Shell reaffirmed its 2025 capital expenditure guidance of $20-22 billion, signaling controlled spending. However, planned maintenance and asset disposals in Nigeria are expected to reduce Q2 production, particularly in upstream operations.

The energy sector faces ongoing challenges, including geopolitical uncertainties and fluctuating oil prices. Industry production is projected to rise in 2025 and 2026, potentially adding pressure on prices. Despite these headwinds, Shell’s diversified portfolio and focus on LNG position it to navigate market volatility. As Sawan noted, the company aims to deliver “solid results” while maintaining its commitment to shareholders.