London, United Kingdom – Shell Plc, a British oil and gas supermajor, reported record profits in its first quarter earnings, exceeding expectations by 18%. The company’s success was attributed to its leading scale and expertise in LNG, as well as its best-in-class trading division. These factors, combined with a new strategy focused on delivering attractive shareholder returns and cost savings, contributed to Shell’s strong financial position.
The earnings release on May 2 showcased Shell’s ability to profit from disrupted markets in refined products through its trading desks. The company announced a quarterly buyback pace of $3.5 billion, reinforcing its commitment to shareholder returns. With an annualized buyback plan of $14 billion, Shell anticipates a total distribution yield of over 10%.
Despite facing risks such as commodity price weakness and operational outages, Shell’s valuation remains discounted compared to its peers. The company’s performance in the first quarter highlighted its structural cost measures and share buybacks, driving financial growth amidst lower commodity prices. An Overweight rating was reiterated with a price target of $90 per US ADR, implying significant price upside and total return potential.
Shell’s strategic divestment initiatives in non-core areas have garnered attention, with advanced talks for selling assets like the Singapore Bukom refinery and petrochemical facilities. These divestments align with CEO Sawan’s cost-cutting strategy and aim to boost returns on capital. Additionally, Shell is reportedly eyeing a 40% stake in Galp Energia’s Namibia exploration block, indicating a strategic move to enhance its reserves and oil output.
The company’s focus on profitability and cash generation was evident in its capital spending, which decreased by 37% in the first quarter. By reallocating divestment proceeds into higher-return projects, Shell aims to optimize its portfolio and drive long-term growth. Moreover, the consistent buyback pace is expected to yield a total distribution of over 10%, making Shell an appealing investment opportunity compared to its peers.
