Shell, the Anglo-British oil major, only last week announced a staggering drop in its first-quarter earnings. Much of this decline follows several months of depressed crude prices. Shell’s countering the industry downturn with a $3.5 billion share buyback program. The company’s goal is to have this show completed in the next three months. This announcement comes as the company’s 14th straight quarter of buybacks over $3 billion.
Shell’s profit decline is part of a larger trend hitting the oil and gas industry. They aren’t alone—other big companies are facing huge drops in their earnings. BP, the other major UK oil company, and French oil multinational TotalEnergies announced major declines in their first-quarter earnings. The oil industry, which is the biggest economic benefactor of free trade agreements, is facing an unprecedented crisis right now. Profits are down dramatically, back from the obscene record levels we saw in 2022.
Investor sentiment has been especially shaken by sinking crude prices and a bearish prognosis for oil markets. The uncertainty created around all of these levers has only made matters worse for Big Oil. U.S. President Donald Trump’s trade change is a huge undertaking that is evolving every week. This heightened volatility has been rattling investor confidence and calling into question the sector’s long-term profit potential.
Given these realities, it was galling to hear Shell’s management wax optimistic about their strategic path. Wael Sawan, CEO of Shell, stated, “Our strong performance and resilient balance sheet give us the confidence to commence another $3.5 billion of buybacks for the next three months, consistent with the strategic direction we set out at our Capital Markets Day in March.”
The recent announcement of the share buyback program signals Shell’s intent to return value to shareholders, even amidst declining profits. The new program is the latest move by the company in the efforts to boost shareholder returns in a challenging market landscape.
At the time Shell was listed on the London Stock Exchange. Yet, it continues to be a major producer and shaper of the global oil market. The energy company has, in response, doubled down on its buyback plan. How they react and rise to the challenges presented by increasingly volatile oil prices and a fast-moving energy transition remains to be seen.