In a challenging market environment characterized by dwindling energy prices and refining margins, Shell’s earnings for the first quarter of 2025 have undergone a significant decline. The decline represents a more than 25% drop, compared to the earnings from the same period in the previous year. Shell’s adjusted earnings for this period rounded off to approximately $5.6 billion, a stark decrease from the $7.7 billion recorded in the corresponding period last year. However, the results still surpassed analyst predictions, which were slightly below the $5 billion mark.
Mounting apprehensions around an economic slump, ignited by the ongoing trade disputes initiated by US President Donald Trump, have been a major factor influencing the recent dip in oil prices. When considering the global benchmark Brent crude oil, the average price for the first quarter of the year rested around $75 a barrel. This figure appears considerably less when compared to the approximately $87 per barrel average recorded during the same timeframe last year.
Not all aspects of Shell’s performance were negatively impacted, however. Certain factors managed to cushion the fall in profits. Specifically, a reduction in exploration well write-offs, a decrease in overall operational costs, and an increase in product margins contributed to buffering the profits in these testing times, as revealed by Shell.
One noteworthy detail revealed by Shell is the tentative refining margin, which stood at $6.20 per barrel. While this is significantly lower than the $12 per barrel achieved in the previous year, it marginally surpasses the $5.50 per barrel from the last quarter of 2024.
In March, Shell expressed plans to return more capital to its shareholders. This announcement followed a perceptible increase in the sales of liquefied natural gas (LNG). The motive was to offer higher returns to shareholders, made possible due to the better-than-expected LNG sales.
The disclosures also included a notable charge related to the UK Energy Profits Levy, better known as the windfall tax. The group’s accounts displayed a charge of $0.5 billion with respect to this tax. Additionally, impairment charges were also levied, further adding to the company’s financial burden.
Financially strenuous events of this nature cost Shell around $800 million in the quarter. One can draw a contrast with the final quarter of the previous year, where similar expenses cost Shell an overwhelming $2.8 billion. Hence, these costs appear to be declining compared to past burdens.
Consistency was maintained in Shell’s strategy pertaining to share buyback programs. The company has made assurances of buying back shares worth $3.5 billion in the second quarter. This move marks Shell’s 14th consecutive quarter of large-scale share buyback programs.
Positive news stems from Shell’s gas trading business, which managed to maintain the performance level from the previous quarter. This stability is worth highlighting, as it was achieved despite the blow from maturing hedging contracts. On the flipside, BP reported that its gas trading division’s disappointing performance negatively affected their first-quarter results.
As markets opened to the news of Shell’s first-quarter earnings, the company’s shares rose by 3.3%, reaching 2,516.5p. Despite starting the year with a minor slump of 1.5%, Shell’s shares have managed a commendable recovery by increasing 12.4% over the previous 12 months.
Moving forward, Shell has restated a trimmed-down investment budget for the current year. This decision has been made keeping in mind the current market conditions and internal financial targets. The revised annual investment budget now lies within the range of $20 billion to $22 billion.
The course set out for Shell appears to be pragmatic and realistic, given the wavering energy prices and global economic conditions. Shell continues to navigate through these unpredictable waters with priority being given to its shareholders and continuous efforts at reducing costs.
The balancing act performed by Shell during these trying times underscores not only the resilient nature of the energy sector, but also serves as a testament to the company’s ability to adjust its navigational course based on the ebbs and flows of the wider economic landscape.
While the drop in earnings seen in the first quarter is certainly noteworthy, it is too early to predict the overall impact on Shell’s annual performance. An appreciation of the full picture will only be possible after the subsequent quarters’ performances unfold, each contributing their share to the annual report of 2025.
The post Shell’s Profits Slide Amidst a Challenging Market appeared first on Real News Now.
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