Shell profits collapse to lowest in five years due to oil prices. What about the stock?

Profit of Europe's largest oil company Shell in the fourth quarter of 2025 fell sharply and was less than analysts' expectations. Lower oil prices, weak oil trading results and difficulties in the chemicals business outweighed the effect of higher refining revenues, Bloomberg writes.

- Shell's adjusted net income for the quarter amounted to $3.26 billion - 11% less than a year earlier and below analysts' average forecast of $3.5 billion, Bloomberg reports. That's the lowest result in nearly five years, CNBC notes. A slight increase in production - within expectations - failed to support profitability, Bloomberg notes.

- For the full year 2025, Shell reported an adjusted profit of $18.5 billion, which was below expectations and 22% less than the annual profit of $23.7 billion a year earlier, CNBC reported.

- Shell's oil production in the quarter rose 2% year-on-year, with its U.S. rivals Chevron and Exxon Mobil up 20% and 15%, respectively.

- The key production regions for Shell remain Brazil and the Gulf of Mexico, as well as a new joint venture in the UK North Sea with Norway's Equinor ASA. However, these projects are attracting less interest from investors than the assets of competitors: Chevron increased production due to fields in Kazakhstan and integration of the Hess portfolio, and Exxon provided growth thanks to production in the Perm Basin and a large-scale project in Guyana, Bloomberg notes.

- The company announced a 4% dividend hike to $0.37 per share, as well as a $3.5 billion share repurchase program, marking the 17th consecutive quarter with more than $3 billion in share repurchases, CNBC noted.

Shares of Shell, traded in London, at the trades on February 5 at the moment declined by 2.5%, but then slowed down to about 0.8%. Since the beginning of the year, the securities have added about 4%. The company's receipts, traded in New York, were cheaper by more than 2% on the premarket.

Shares of Shell last year were the best performing in dollar terms among the world's five largest oil companies, but since mid-November 2025, growth has tapered off, and in 2026, the securities are still lagging behind competitors, notes Bloomberg. Nevertheless, in the three years of CEO Wael Sawan's tenure, the company has outperformed European rivals in terms of shareholder returns.

Shell's profit shortfall came after analysts cut their forecasts. This followed the company's January warning that oil trading results in the quarter were "significantly weaker" than in the previous period, and the troubled chemicals division suffered losses, Bloomberg reports.

"The decline in profits exposes the deteriorating economics of fossil fuels. At the same time, the company has no plan to create value for shareholders," said Mark Van Baal, founder of the activist foundation Follow This.

"We note that Shell's reserve life is now at 7.8 years (vs. 8.9 years a year ago) due to the sale of assets in Nigeria and maintaining a position in the oil sands. As this is weaker than a number of peers, we expect this could increase questions to Shell's strategy of replenishing reserves through M&A," said RBC analyst Biraj Borhataria.

The company's gearing (gearing is the ratio of net debt to equity) rose, raising questions about the company's ability to organically support current share repurchases over the course of this year, Bloomberg writes.

"Importantly for investors, Shell continues to prioritize shareholder returns. The company confirmed an additional $3.5 billion in share repurchases in the first quarter, even as some other European oil companies decided to reduce payouts," Maurizio Carulli, global energy analyst at Quilter Cheviot, said in a note.

Carulli added that in the longer term, a key strategic issue for the company will be how it will strengthen its reserve replacement ratio - through organic development or selective M&A - to ensure future production volumes and cash flow generation.

Shell shares have 19 ratings from analysts and the opinions are almost equally divided, MarketScreener shows. Ten recommend Hold, nine recommend Buy and nine recommend Outperform. There are no sell recommendations.

This article was AI-translated and verified by a human editor