Shares in oil giant Shell (SHEL) soared today as it announced a bumper $3.5 billion share buyback despite slumping profits.
Buyback Bonanza Continues
The group, whose stock was up nearly 4% in pre-market trading, said it would buy back the shares over the next three months. It marks the fourteenth consecutive quarter of a buyback program of at least $3 billion.
It reported adjusted earnings of $5.6 billion for its first quarter, up 52% from the previous quarter. Although this beat market expectations of $5 billion, it was down 27% from the same quarter in 2024.
It was hit by a drop in oil prices following the turmoil and uncertainty caused by President Donald Trump’s tariff strategy and lower refining margins than last year.
Indeed, it reported a refining margin of $6.20 a barrel, well below the $12 achieved a year ago but ahead of the $5.50 in the fourth quarter of 2024.
Cooking on Gas
Shell added that its gas trading business was in line with the previous quarter despite a hit from expiring hedging contracts. That contrasted with rival BP, (BP) which said that a weaker gas trading business had battered its first-quarter expectations.
Net debt came to $41.5 billion in the first quarter with free cash flow dropping from $9.8 billion in the first quarter of 2024 to $5.3 billion because of falling oil prices.
It was also hit by a charge of $0.5 billion related to the U.K. Energy Profits Levy – or windfall tax as it is better known – and impairment charges.
AJ Bell investment director Russ Mould said investors would be concerned about the cashflow and debt numbers, but overall believes Shell is in a stronger position than rival BP.
“They can point to BP and say at least we’re not as bad as that. Shell which pivoted towards natural gas more than a decade ago continues to see benefits from this strategy with its integrated gas division delivering a robust showing. Gas could have a significant role to play as the world looks to wean itself off coal and oil,” said Mould.
Is SHEL a Good Stock to Buy Now?
On TipRanks, SHEL has a Strong Buy consensus based on 7 Buy and 1 Hold rating. Its highest price target is $85. SHEL stock’s consensus price target is $78.67 implying an 21.40% upside.
