Shell has announced a 4% increase in dividends alongside a substantial $3.5 billion in share buybacks, marking the 17th consecutive quarter where it has executed buybacks exceeding $3 billion. However, this comes as the oil giant grapples with a significant downturn in its annual earnings, reflecting the impact of declining oil prices.
Declining Earnings Amidst Payouts
In its latest financial report, Shell disclosed a 22% decrease in adjusted earnings, totalling $18.5 billion (£13.6 billion) for the year 2025, down from $23.7 billion in 2024. This decline is largely attributed to a steady drop in global oil prices, which has put pressure on the company’s profitability. The last quarter of 2025 yielded earnings of $3.25 billion, falling short of analyst expectations of $3.5 billion and substantially lower than the $5.4 billion reported in the previous quarter.
Despite the drop in profits, Shell has continued its trend of delivering substantial shareholder returns. The company’s net debt surged to $45.7 billion by year-end, constituting nearly 21% of its total capital. This figure rose from $41.2 billion at the end of September, highlighting the firm’s increasing reliance on debt to finance its ongoing payouts.
Market Dynamics Impacting Oil Prices
The international crude oil price fell below $60 per barrel towards the end of 2025—the first time in nearly five years—largely influenced by geopolitical factors, including the prospects of a peace agreement in the Russia-Ukraine conflict. Analysts warn that if Western sanctions on Russian exports are lifted, it could exacerbate the existing glut in the global oil market.
Overall, oil prices experienced a nearly 20% decline throughout 2025, marking the steepest annual loss since the onset of the Covid-19 pandemic. This trend signifies the first instance in which the oil market has witnessed three consecutive years of annual losses, raising concerns about the sector’s stability.
Leadership’s Perspective on Future Growth
Shell’s CEO, Wael Sawan, expressed confidence in the company’s prospects despite the challenging market environment, stating that the year reflected “accelerated momentum” for the business. He highlighted the generation of $26 billion in free cash flow and significant advancements in refining the company’s portfolio, alongside achieving $5 billion in cost savings since 2022, with expectations for further improvements.
Sawan’s remarks indicate a strategic focus on operational efficiency and a commitment to navigating the complexities of the current energy landscape.
Why it Matters
Shell’s decision to persist with substantial shareholder returns amidst declining earnings and rising debt raises important questions about the sustainability of its financial strategy. As the company faces an evolving global oil market, characterised by volatility and geopolitical uncertainties, its ability to balance shareholder interests with sound fiscal management will be crucial in determining long-term success. Investors and analysts alike will be closely monitoring Shell’s next moves as the energy sector continues to grapple with unprecedented challenges.
