Shell to raise dividends again despite 30% fall in annual profits

Plan to raise shareholder payouts by 4% follows surprise $7.3bn profit in final quarter despite fall in gas prices

Shell’s investors can expect another year of growing payouts after the oil company reported better than expected profits of more than $28bn (£22bn) for 2023 in one of its most profitable years on record.

Shell’s profits tumbled by almost a third to $28.3bn last year, from record high profits of $40bn at the peak of the global energy crisis in 2022, after a cooling of oil and gas markets.

But the company’s earnings were still the second highest it has reported since 2011 after a better than expected final quarter in which Shell reported adjusted earnings of $7.3bn compared with forecasts of just over $6bn.

The oil company, which handed its shareholders $23bn in payouts last year, plans to raise its dividend by 4% and return $3.5bn to investors in share buy-backs over the first quarter of 2024.

Shell’s chief executive, Wael Sawan, revealed the expectation-beating results as green activists staged a protest outside the company’s London headquarters. Greenpeace campaigners held a mock party dressed as Shell board members while holding a burning sign reading “Your Future”.

Sawan told investors that the company was on track to cut billions in costs while raising dividends and increasing its oil and gas production. The plans have angered green campaigners, who have called for the company to reduce its fossil fuel production and invest more of its profits in green energy alternatives.

Shell invested $2.7bn in its low-carbon business last year, or just over 10% of its total investments, down from 14% of its total spending in 2022. Mark van Baal, the founder of green shareholder group Follow This, said: “The decreased investments in its clean energy division show that Shell is not serious about the energy transition. As long as investments in fossil fuels dwarf investments in renewables, Shell cannot claim to be in transition.”

Sawan, who became chief executive early last year, has also reversed a plan to reduce Shell’s oil and gas production by 1-2% a year in pursuit of higher profits. He said the company added 200,000 barrels of oil equivalent a day to its production last year and by 2025 would start enough new fossil fuel projects to add half a million barrels a day.

The new oil and gas projects would enable Shell to “continue providing the energy security that the world needs, while delivering cashflow longevity into the future”, he said. The decision to continue investing in fossil fuels goes against advice from climate experts who have said there can be no new fossil fuel development if the world hopes to avoid a climate crisis.

Shell said last year that it plans to cut hundreds of jobs from its low carbon division as part of a plan to cut its costs by between $2bn and $3bn by the end of 2025. Sawan said the company had already cuts its structural costs by $1bn.

Sinead Gorman, Shell’s chief financial officer, said the company would remain “disciplined” in its low-carbon spending and would “walk away” from opportunities where the returns are lower than their shareholders would expect. The company is expected to set out its priorities for low-carbon spending in March, but is not expected to set new green targets.

Sjoukje van Oosterhout, a researcher at Friends of the Earth in the Netherlands, accused Shell of choosing “shareholders over the climate, once again”.

“Wael Sawan [CEO of Shell] is still pressing on the brakes when it comes to sustainable investments and in the meantime is still launching major new fossil projects, for example in Brazil and the Gulf of Mexico. Time is running out, but Shell refuses to change course and is racing full speed towards the destruction of the earth,” Van Oosterhout said.

Cover photo: Greenpeace activists hold a mock profits party behind a burning sign reading ‘Your Future’ during a protest outside Shell's headquarters in London. Photograph: Henry Nicholls/AFP/Getty Images