Shell plc publishes fourth quarter 2023 press release
- Shell reported adjusted earnings of $7.3 billion for Q4 2023
- Total CFFO amounted to $12.6 billion in 2023
- 4% increase in dividend per share for the fourth quarter
- $3.5 billion share buyback program announced
- $1 billion of structural cost reductions delivered in 2023
- Lower refining margins in Q4 2023
- Weak demand impacting Chemicals & Products segment
Insights
The recent announcement by Shell regarding its financial results for Q4 2023 is a significant indicator of the company's operational health and strategic direction, which is of paramount interest to shareholders and potential investors. The reported adjusted earnings of $7.3 billion and a Cash Flow From Operations (CFFO) of $12.6 billion for the quarter reflect a robust operational performance, particularly emphasizing the strength in LNG trading and optimization. The decision to return $23 billion to shareholders and the commencement of a $3.5 billion share buyback program are actions that typically resonate positively in the stock market, as they signal confidence in the company's liquidity and profitability.
Moreover, the 4% dividend increase aligns with a progressive dividend policy, which is often seen as a commitment to delivering shareholder value. The structural cost reductions of $1 billion achieved in 2023, along with disciplined capital expenditure, suggest a strategic focus on efficiency and cost management. These factors combined could lead to a favorable investor sentiment, potentially impacting the company's stock price and the broader energy sector.
However, the long-term implications of these financial decisions must be considered in the context of volatile energy markets and the global transition to renewable energy sources. The impact on the stock market will also hinge on Shell's ability to sustain such performance and navigate the complexities of energy market dynamics.
Shell's strategic investments in the advantaged upstream portfolio, such as the start-up of Mero-2 in Brazil and the final investment decision on Sparta in the US Gulf of Mexico, indicate a targeted approach to asset development. This is particularly relevant in an industry where sustainable and cost-effective resource extraction is critical. The company's focus on simplifying its organization and reducing emissions is in line with the broader industry's shift towards sustainability and environmental responsibility.
The renewables and energy solutions segment's performance, highlighted by higher trading and optimization results, underscores the growing importance of this sector in Shell's portfolio. As the energy industry evolves, the ability to effectively integrate renewable energy sources and capitalize on market volatility will become increasingly valuable. Shell's performance in this area could be a bellwether for the industry's transition to cleaner energy and the potential for profitability in this emerging market.
Analyzing the provided financial data, it is evident that Shell's marketing and chemicals segments experienced certain headwinds, such as lower volumes and refining margins, as well as global oversupply and weak demand in chemicals. These challenges reflect broader market trends and highlight the cyclical nature of commodity-based businesses. The company's outlook on refinery utilization and chemical plant utilization suggests an anticipated rebound, which could be contingent on global economic factors and industry-specific demand recovery.
Investors should note the potential risks associated with these segments, including the impact of global economic conditions on demand for oil products and chemicals. The ability of Shell to adapt to these market conditions and optimize its portfolio mix will be critical in maintaining its financial performance and competitive position in the market.
London, February 1, 2024
"Shell delivered another quarter of strong performance, concluding a year in which we made good progress across the targets outlined at our Capital Markets Day1. As we enter 2024 we are continuing to simplify our organisation with a focus on delivering more value with less emissions.
In 2023, Shell returned
Shell plc Chief Executive Officer, Wael Sawan
DELIVERING STRONG RESULTS AND SHAREHOLDER DISTRIBUTIONS
- Q4 2023 Adjusted Earnings2 of
$7.3 billion , reflecting robust operational performance and strong LNG trading and optimisation results. CFFO of$12.6 billion for the quarter; total CFFO amounted to$54.2 billion in 2023. - 2023 full year shareholder distributions of
$23 billion , in excess of40% of CFFO for 2023. 4% increase in dividend per share for the fourth quarter and a$3.5 billion share buyback programme, expected to be completed by Q1 2024 results announcement.- Enhanced the advantaged upstream portfolio with the start-up of Mero-2 in Brazil and the final investment decision on Sparta in the US Gulf of Mexico. By focusing the portfolio and simplifying the organisation,
$1 billion of structural cost reductions delivered in 2023. - Focus on disciplined spending saw 2023 cash capex of
$24.4 billion ; 2024 cash capex outlook:$22 - 25 billion.
| $ million2 | Adj. Earnings | Adj. EBITDA | CFFO | Cash capex | |
| Integrated Gas | 3,963 | 6,578 | 3,597 | 1,196 | |
| Upstream | 3,088 | 7,910 | 5,787 | 2,436 | |
| Marketing | 692 | 1,337 | 2,709 | 1,339 | |
| Chemicals & Products3 | 83 | 770 | 207 | 1,031 | |
| Renewables & Energy Solutions | 155 | 228 | (1,265) | 1,026 | |
| Corporate | (567) | (488) | 1,540 | 85 | |
| Less: Non-controlling interest (NCI) | 108 | ||||
| Shell | Q4 2023 | 7,306 | 16,335 | 12,575 | 7,113 |
| Q3 2023 | 6,224 | 16,336 | 12,332 | 5,649 | |
| FY 2023 | 28,250 | 68,538 | 54,196 | 24,393 | |
| FY 2022 | 39,870 | 84,289 | 68,414 | 24,833 | |
1Progress to date on the financial targets that were announced during Capital Markets Day in June 2023 is available at https://www.shell.com/investors/results-and-reporting/progress-on-cmd23.html
2Income/(loss) attributable to shareholders for Q4 2023 is
3Chemicals & Products adjusted earnings at a subsegment level are as follows - Chemicals
- CFFO of
$12.6 billion for Q4 2023 includes a working capital inflow of$3.3 billion due to lower prices. CFFO reflects tax payments of$3.6 billion and the timing impact of payments for emissions certificate and biofuel programmes mainly in Germany1. Net debt of$43.5 billion at the end of 2023 is$1.3 billion below 2022.
| $ billion2 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 |
| Divestment proceeds | 0.2 | 1.7 | 0.5 | 0.3 | 0.6 |
| Free cash flow | 15.5 | 9.9 | 12.1 | 7.5 | 6.9 |
| Net debt | 44.8 | 44.2 | 40.3 | 40.5 | 43.5 |
1 Includes payments for the Brennstoffemissionshandelsgesetz (Fuel Emissions Trading Act).
2 Reconciliation of non-GAAP measures can be found in the unaudited results, available at www.shell.com/investors.
Q4 2023 FINANCIAL PERFORMANCE DRIVERS
INTEGRATED GAS
| Key data | Q3 2023 | Q4 2023 | Q1 2024 outlook |
| Realised liquids price ($/bbl) | 63 | 65 | — |
| Realised gas price ($/mscf) | 8 | 8 | — |
| Production (kboe/d) | 900 | 901 | 930 - 990 |
| LNG liquefaction volumes (MT) | 6.9 | 7.1 | 7.0 - 7.6 |
| LNG sales volumes (MT) | 16.0 | 18.1 | — |
- Adjusted Earnings higher than Q3 2023 reflecting exceptional trading and optimisation results combined with higher volumes. Trading and optimisation results were significantly higher compared with Q3 2023 due to seasonality and a high number of optimisation opportunities.
- Q1 2024 outlook reflects Prelude FLNG in Australia back in operation after a major turnaround.
UPSTREAM
| Key data | Q3 2023 | Q4 2023 | Q1 2024 outlook |
| Realised liquids price ($/bbl) | 79 | 80 | — |
| Realised gas price ($/mscf) | 7 | 8 | — |
| Liquids production (kboe/d) | 1,311 | 1,361 | — |
| Gas production (mscf/d) | 2,564 | 2,952 | — |
| Total production (kboe/d) | 1,753 | 1,870 | 1,730 - 1,930 |
- Adjusted Earnings higher in Q4 2023 due to higher production volumes and favourable movements in non-cash deferred tax positions.
- Q1 2024 production outlook reflects planned maintenance in Deepwater assets.
MARKETING
| Key data | Q3 2023 | Q4 2023 | Q1 2024 outlook |
| Marketing sales volumes (kb/d) | 2,654 | 2,508 | 2,150 - 2,650 |
| Mobility (kb/d) | 1,782 | 1,690 | — |
| Lubricants (kb/d) | 82 | 78 | — |
| Sectors & Decarbonisation (kb/d) | 790 | 740 | — |
- Marketing earnings impacted by lower volumes due to seasonality. Adjusted Earnings also reflect one-off tax help.
CHEMICALS & PRODUCTS
| Key data | Q3 2023 | Q4 2023 | Q1 2024 outlook |
| Refining & Trading sales volumes (kb/d) | 1,548 | 1,560 | — |
| Chemicals sales volumes (kT) | 2,998 | 2,588 | — |
| Refinery utilisation (%) | 84 | 81 | 83 - 91 |
| Chemicals manufacturing plant utilisation (%) | 70 | 62 | 68 - 76 |
| Global indicative refining margin ($/bbl) | 16 | 10 | — |
| Global indicative chemical margin ($/t) | 115 | 125 | — |
- Lower refining margins in Q4 2023 driven by lower global product demand and utilisation due to planned maintenance activities. Chemicals margins continue to be impacted by global oversupply as well as weak demand. Trading and optimisation significantly lower than Q3 2023.
- Q1 2024 Refinery utilisation outlook reflects completion of planned maintenance activities in North America.
RENEWABLES & ENERGY SOLUTIONS
| Key data | Q3 2023 | Q4 2023 |
| External power sales (TWh) | 76 | 68 |
| Sales of natural gas to end-use customers (TWh) | 170 | 175 |
| Renewables power generation capacity* | 7.4 | 6.6 |
| 2.5 | 2.5 |
| 4.9 | 4.1 |
*Excluding Shell's equity share of associates where information cannot be obtained
- Adjusted Earnings are higher than in Q3 2023 mainly driven by higher trading & optimisation results in Europe and the Americas due to volatility and seasonal effects.
Renewables and Energy Solutions includes renewable power generation, the marketing and trading and optimisation of power and pipeline gas, as well as carbon credits, and digitally enabled customer solutions. It also includes the production and marketing of hydrogen, development of commercial carbon capture and storage hubs, investment in nature-based projects that avoid or reduce carbon emissions, and Shell Ventures, which invests in companies that work to accelerate the energy and mobility transformation.
CORPORATE
| Key data | Q3 2023 | Q4 2023 | Q1 2024 outlook |
| Adjusted Earnings ($ billion) | (0.5) | (0.6) | (0.6) - (0.4) |
- The Adjusted Earnings outlook is a net expense of
$1.5 - 2.1 billion for the full year 2024. This excludes the impact of currency exchange rate and fair value accounting effects.
UPCOMING INVESTOR EVENTS
| 14 February 2024 | Shell LNG Outlook 2024 |
| 14 March 2024 | Publication of Energy Transition Strategy 2024 |
| 27 March 2024 | Annual ESG Update |
| 2 May 2024 | First quarter 2024 results and dividends |
| 21 May 2024 | Annual General Meeting |
| 1 August 2024 | Second quarter 2024 results and dividends |
| 31 October 2024 | Third quarter 2024 results and dividends |
USEFUL LINKS
ALTERNATIVE PERFORMANCE (NON-GAAP) MEASURES
This announcement includes certain measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP) such as IFRS, including Adjusted Earnings, Adjusted EBITDA, CFFO excluding working capital movements, Cash capital expenditure, free cash flow, Divestment proceeds and Net debt. This information, along with comparable GAAP measures, is useful to investors because it provides a basis for measuring Shell plc’s operating performance and ability to retire debt and invest in new business opportunities. Shell plc’s management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating the business performance.
This announcement contains a forward-looking non-GAAP measure for cash capital expenditure and divestments. We are unable to provide a reconciliation of this forward-looking non-GAAP measure to the most comparable GAAP financial measure because certain information needed to reconcile the non-GAAP measure to the most comparable GAAP financial measure is dependent on future events some of which are outside the control of the company, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measure with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are estimated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.
CAUTIONARY STATEMENT
The companies in which Shell plc directly and indirectly owns investments are separate legal entities. In this announcement "Shell", "Shell Group" and "Group" are sometimes used for convenience where references are made to Shell plc and its subsidiaries in general. Likewise, the words "we", "us" and "our" are also used to refer to Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. "Subsidiaries", "Shell subsidiaries" and "Shell companies" as used in this announcement refer to entities over which Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as "joint ventures" and "joint operations", respectively. "Joint ventures" and "joint operations" are collectively referred to as "joint arrangements". Entities over which Shell has significant influence but neither control nor joint control are referred to as "associates". The term "Shell interest" is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.
This announcement contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "aim", "ambition", "anticipate", "believe", "could", "estimate", "expect", "goals", "intend", "may", "milestones", "objectives", "outlook", "plan", "probably", "project", "risks", "schedule", "seek", "should", "target", "will" and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, judicial, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Shell plc’s Form 20-F for the year ended December 31, 2022 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, February 1, 2024. Neither Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.
All amounts shown throughout this announcement are unaudited. The numbers presented throughout this announcement may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures, due to rounding.
Shell’s Net Carbon Intensity
Also, in this announcement we may refer to Shell’s “Net Carbon Intensity”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions. The use of the term Shell’s “Net Carbon Intensity” is for convenience only and not intended to suggest these emissions are those of Shell plc or its subsidiaries.
Shell’s Net-Zero Emissions Target
Shell’s operating plan, outlook and budgets are forecasted for a ten-year period and are updated every year. They reflect the current economic environment and what we can reasonably expect to see over the next ten years. Accordingly, they reflect our Scope 1, Scope 2 and Net Carbon Intensity (NCI) targets over the next ten years. However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCI target, as these targets are currently outside our planning period. In the future, as society moves towards net-zero emissions, we expect Shell’s operating plans to reflect this movement. However, if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.
The content of websites referred to in this announcement does not form part of this announcement.
We may have used certain terms, such as resources, in this announcement that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
The financial information presented in this announcement does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006 (“the Act”). Statutory accounts for the year ended December 31, 2022 were published in Shell’s Annual Report and Accounts, a copy of which was delivered to the Registrar of Companies for England and Wales, and in Shell’s Form 20-F. The auditor’s report on those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or 498(3) of the Act. The statutory accounts for the year ended December 31, 2023 will be delivered to the Registrar of Companies for England and Wales in due course.
The information in this announcement does not constitute the unaudited condensed consolidated financial statements which are contained in Shell’s fourth quarter 2023 unaudited results available on www.shell.com/investors.
CONTACTS
- Media: International +44 207 934 5550; USA +1 832 337 4355
FAQ
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