Energy giant Shell is expected to announce a significant drop in annual profits for 2024 when it releases its financial results this Thursday. The decline comes after a year of stagnant oil prices and diminishing demand for fossil fuels, partly attributed to the rising popularity of electric vehicles.
Analysts forecast Shell’s earnings for 2024 to be £24.1 billion, a substantial decrease from the £28.3 billion reported in 2023.
This downward trend reflects the challenges faced by major oil companies in adapting to changing energy landscapes and consumer preferences. The oil industry has experienced a notable shift from the record profits of previous years, which were driven by soaring oil prices during the global energy crisis. Shell, along with other oil supermajors like ExxonMobil and Chevron, has seen falling margins in its oil refining business throughout 2024.
Looking ahead, 2025 may bring further challenges for oil prices. Analysts predict increased production from the United States, Canada, and Brazil, coupled with continued weak demand from the crucial Chinese market.
Shell’s liquefied natural gas (LNG) division, a significant part of its business, has also faced difficulties.
The company, which is the world’s largest LNG trader, reported a decline in production during the final quarter of 2024.
This decrease was attributed to “lower feedgas” and fewer cargo shipments compared to the previous period.
Derren Nathan, head of equity analysis at Hargreaves Lansdown, commented on Shell’s recent trading statement: “Shell’s recent trading statement revealed that while most business units have been trading broadly in line with previous guidance, the production and liquefaction ranges for integrated gas has been lowered.”
As Shell navigates these challenges, investors will be closely watching the company’s strategy for shareholder distributions. The energy giant has maintained a consistent pattern of share buyback programs, announcing at least $3 billion in each of the last 12 quarters.
However, Nathan cautioned, “Of course, no further payouts can be guaranteed. And with a new financial year under way expect an update on the company’s capital allocation priorities.”
As the energy sector continues to evolve, Shell’s upcoming financial results will provide crucial insights into how major oil companies are adapting to the changing global energy landscape and the increasing pressure to transition towards more sustainable energy sources.
