Shell Keeps $3.5 Billion Buyback Amid Earnings Miss

Despite missing earnings expectations, Shell plc (SHEL) has maintained its $3.5 billion share buyback program, demonstrating the company's commitment to returning capital to shareholders. The oil giant reported a bigger-than-expected drop in fourth-quarter profits, with adjusted earnings falling to $3.66 billion from $6 billion in the third quarter. This decline was attributed to lower prices and margins, higher exploration well write-offs, and the non-cash impact of expiring hedging contracts on LNG trading and optimization results.

Shell's decision to continue the buyback program, despite the earnings miss, signals confidence in the company's financial position and future prospects. The program, which is expected to be completed by Q1 2025, is part of a series of consecutive quarterly buybacks, totaling $13 billion since 2024. This commitment to shareholder returns is in line with or even exceeds that of Shell's peers, such as BP, which had a $2.5 billion buyback program in 2024.



However, maintaining the buyback program may have negative implications for Shell's financial health. The company's net debt rose due to weaker trading amid lower oil prices, and continuing the buyback program could further increase debt levels. Additionally, the program may strain cash flow, especially if Shell faces further earnings misses or unexpected expenses. This could limit the company's ability to invest in growth opportunities or maintain its dividend.

In conclusion, Shell's decision to keep its $3.5 billion buyback program amid an earnings miss demonstrates the company's commitment to shareholder returns. However, this decision may also negatively impact the company's financial health by increasing debt and straining cash flow. It is crucial for Shell to balance these factors and ensure that the buyback program aligns with its long-term financial goals and the best interests of all stakeholders.