Shell's Defiant Payout Strategy Amid Sector Retreat

Shell maintains $3.5B buyback program and raises dividend as profits fall, contrasting with BP and Equinor's pullbacks. CEO Sawan refocuses on LNG and upstream.

In a bold statement to the market, Shell is doubling down on shareholder returns even as its annual profits declined. While peers like BP and Equinor are scaling back, the British energy giant is maintaining its substantial capital return program. This commitment persists despite quarterly earnings that fell short of expectations and an operating profit that has reached its lowest point since 2021.

A Sector in Contrast

The current landscape for major oil and gas companies shows a clear divergence. In February, competitor BP suspended its share buyback plans. Similarly, Norway's Equinor has made a sharp reduction in its projected 2026 buyback budget, slashing it from $5 billion to $1.5 billion. Shell’s strategy stands in stark opposition to this trend of retrenchment.

Uninterrupted Capital Returns

Shell’s consistency in returning cash to shareholders is notable. On Monday, the company purchased over 1.1 million of its own shares for cancellation. This transaction is part of an ongoing $3.5 billion repurchase initiative scheduled to run until May 1, 2026. This marks the seventeenth consecutive quarter in which Shell has returned a minimum of $3 billion to its investors.

The company's robust financial foundation is the key enabler of this approach. For the full year 2025, Shell reported an operating cash flow of $42.9 billion. This strong liquidity allows management to look beyond recent operational weakness, which included a 22% drop in annual profit. It also provided the capacity to raise the fourth-quarter dividend by 4%, even as adjusted quarterly earnings of $3.26 billion missed analyst forecasts.

Strategic Refocus Under New Leadership

CEO Wael Sawan is sharpening the company's operational focus alongside these financial maneuvers. The strategic emphasis is shifting more decisively toward the profitable core businesses of liquefied natural gas (LNG) and upstream operations. A recent exploration agreement for a gas field in the Black Sea off the coast of Bulgaria exemplifies this pivot.

Concurrently, the company is reportedly reviewing the future of its Sprng Energy renewables division, acquired for $1.55 billion in 2022. This potential divestment consideration highlights a disciplined capital allocation strategy aimed at deploying resources where the highest returns are anticipated. The ultimate goal is to safeguard the ambitious future distributions to shareholders.

Shell's shares currently trade at €33.87, placing them within close reach of their 52-week high of €33.98. The sustained buyback activity is widely seen as a direct effort to provide underlying support for the equity price, reinforcing the company's distinctive path within the energy sector.