Shell plc (NYSE: SHELL)

Shell reported Adjusted Earnings of $5.6 billion for Q1 2025, a 52% increase compared to $3.7 billion in Q4 2024. This significant improvement was driven by stronger performance across most business segments, with notable increases in Integrated Gas, Upstream, and Chemicals & Products. Adjusted EBITDA rose to $15.3 billion, up 7% from the previous quarter.

Cash flow from operations (CFFO) decreased to $9.3 billion from $13.2 billion in the previous quarter. This decline was primarily due to working capital outflows of $2.7 billion, consistent with the seasonal pattern observed in first quarters of recent years. CFFO excluding working capital movements was robust at $11.9 billion, which included tax payments of $2.9 billion.

Free cash flow for the quarter was $5.3 billion, down from $8.7 billion in Q4 2024, reflecting both lower CFFO and continued but reduced capital expenditure. Cash capex for Q1 2025 was $4.2 billion, significantly lower than the $6.9 billion in the previous quarter, aligned with the company’s disciplined capital allocation approach and the 2025 cash capex outlook of $20-22 billion.

Net debt increased to $41.5 billion from $38.8 billion in Q4 2024. This increase reflects lease additions related to the Pavilion Energy acquisition as well as a drawdown on loan facilities provided at the completion of the SPDC sale in Nigeria. Despite this increase, Shell maintained a resilient balance sheet with gearing (including leases) at 19%.

The company’s shareholder distribution strategy remained consistent with its Capital Markets Day commitments, announcing a $3.5 billion share buyback program for the next three months. This marks the 14th consecutive quarter with at least $3 billion in buybacks. Total shareholder distributions paid over the last four quarters represented 45% of CFFO, aligning with the company’s distribution target of 40-50% of CFFO through the cycle.

Integrated Gas delivered Adjusted Earnings of $2.5 billion, up from $2.2 billion in Q4 2024. This improvement primarily reflected lower exploration well write-offs, while trading and optimization results remained in line with the previous quarter despite higher unfavorable (non-cash) impact from expiring hedging contracts. LNG sales volumes increased to 16.5 million tonnes from 15.5 million tonnes in Q4, while LNG liquefaction volumes decreased to 6.6 million tonnes from 7.1 million tonnes. The segment strengthened its capabilities with the completion of the Pavilion Energy acquisition.

Upstream segment reported Adjusted Earnings of $2.3 billion, a significant improvement from $1.7 billion in Q4 2024. The increase was driven by lower depreciation following year-end reserves updates and reduced well write-offs, which more than offset the impact of lower sales volumes. Total production remained relatively stable at 1,855 thousand barrels of oil equivalent per day (kboe/d) compared to 1,859 kboe/d in the previous quarter. The segment’s Adjusted EBITDA increased to $7.4 billion, contributing substantially to the group’s overall performance.

Marketing segment delivered Adjusted Earnings of $900 million, up from $800 million in Q4 2024. This improvement was primarily supported by seasonally stronger margins in the Lubricants business. Total marketing sales volumes decreased to 2,674 kb/d from 2,795 kb/d in the previous quarter, reflecting typical seasonal patterns in the first quarter.

Chemicals & Products showed a marked improvement with Adjusted Earnings of $449 million, compared to a loss of $200 million in Q4 2024. This significant turnaround was driven by substantially stronger trading and optimization results, which were in line with contributions seen in Q2 and Q3 of 2024. The Chemicals subsegment continued to face challenges from a weak margin environment, reporting a loss of $100 million, while the Products subsegment generated earnings of $600 million. Refinery utilization improved to 85% from 76% in the previous quarter.

Renewables & Energy Solutions reported an Adjusted Loss of $42 million, a considerable improvement from the $300 million loss in Q4 2024. This positive development was driven by higher seasonal demand and market volatility, which supported stronger trading and optimization results, particularly in the Americas. The segment’s renewables power generation capacity increased slightly to 7.5 GW from 7.4 GW in Q4 2024.

The Corporate segment reported Adjusted Earnings of -$457 million, slightly lower than the -$400 million in the previous quarter, primarily due to higher central costs in the period.

Integrated Gas & Upstream Operations

• Production: Total Upstream production remained stable at 1,855 kboe/d compared to 1,859 kboe/d in Q4 2024
• LNG Liquefaction: Volumes decreased to 6.6 million tonnes from 7.1 million tonnes in Q4 2024
• LNG Sales: Volumes increased to 16.5 million tonnes from 15.5 million tonnes in Q4 2024
• Realized Prices: Liquids prices remained stable at $71 per barrel for Upstream and increased slightly to $64 per barrel for Integrated Gas (from $63 in Q4)
• Gas Prices: Realized gas prices increased for Upstream to $7.4 per thousand scf (from $7.0) but decreased for Integrated Gas to $7.4 per thousand scf (from $8.1)

Downstream Operations

• Refinery Processing: Intake increased to 1,362 kb/d from 1,215 kb/d in Q4 2024
• Refinery Utilization: Improved to 85% from 76% in the previous quarter
• Chemicals Sales: Volumes decreased to 2,813 thousand tonnes from 2,926 thousand tonnes
• Chemicals Plant Utilization: Increased to 81% from 75% in Q4 2024
• Global Indicative Refining Margin: Improved to $6.2 per barrel from $5.5 per barrel
• Global Indicative Chemical Margin: Decreased to $126 per tonne from $138 per tonne

Renewables & Energy Solutions

• Power Sales: External power sales remained stable at 76 TWh
• Pipeline Gas Sales: Increased to 184 TWh from 165 TWh
• Renewables Capacity: Total capacity slightly increased to 7.5 GW from 7.4 GW, with 3.5 GW in operation and 4.0 GW under construction or committed for sale

The operational metrics reflect Shell’s continuing focus on optimizing its core businesses while strategically expanding its low-carbon capabilities. The improved utilization rates in refining and chemicals manufacturing indicate better asset efficiency, while the growth in LNG sales volumes underscores the company’s strength in the global LNG market. The slight increase in renewables capacity aligns with Shell’s energy transition strategy, although this segment remains a relatively small contributor to overall earnings.

During Q1 2025, Shell executed several significant strategic actions to optimize its portfolio and enhance its competitive position:

Key Strategic Developments

• Pavilion Energy Acquisition: Completed the acquisition of Pavilion Energy, strengthening Shell’s LNG trading and optimization capabilities. This strategic move enhances the company’s position in the growing Asian LNG market and provides additional scale to its global LNG portfolio.
• Nigeria Onshore Divestment: Completed the sale of The Shell Petroleum Development Company of Nigeria Limited (SPDC), high-grading the portfolio and reducing exposure to operational challenges in the region. This transaction represents a significant step in Shell’s strategy to focus its portfolio on core assets with lower operational complexity.
• Singapore Energy and Chemicals Park Divestment: Finalized the divestment of the Singapore Energy and Chemicals Park on April 1, 2025, further optimizing the downstream portfolio in line with the company’s strategic focus on higher-value, integrated sites.

Capital Allocation & Shareholder Returns

• Disciplined Capital Expenditure: Maintained disciplined approach to capital allocation with 2025 cash capex outlook of $20-22 billion, supporting both core business growth and energy transition investments.
• Shareholder Distribution: Announced $3.5 billion share buyback program for the next three months, marking the 14th consecutive quarter with at least $3 billion in buybacks.
• Distribution Target Alignment: Total shareholder distributions over the past four quarters represented 45% of CFFO, consistent with the 40-50% of CFFO through-the-cycle distribution target announced at the Capital Markets Day in March 2025.

These strategic actions demonstrate Shell’s commitment to optimizing its portfolio, strengthening its position in growth markets such as LNG, and delivering consistent shareholder returns while maintaining financial resilience. The company continues to execute against the strategic framework presented at its Capital Markets Day in March 2025, focusing on value over volume and positioning for success through the energy transition.

Shell provided the following operational outlook for Q2 2025:

Integrated Gas

• Production: Expected to be in the range of 890-950 thousand boe/d, reflecting higher scheduled maintenance across the portfolio
• LNG Liquefaction: Anticipated volumes of 6.3-6.9 million tonnes, also impacted by scheduled maintenance activities

Upstream

• Production: Projected to be 1,560-1,760 thousand boe/d, lower than Q1 2025 due to scheduled maintenance and the impact of the completed SPDC sale in Nigeria in March 2025

Marketing

• Sales Volumes: Expected to be in the range of 2,600-3,100 kb/d

Chemicals & Products

• Refinery Utilization: Projected at 87-95%, improved from Q1 2025
• Chemicals Manufacturing Plant Utilization: Expected to be 74-82%, slightly lower than Q1 2025
• Guidance Update: Following the Singapore Energy and Chemicals Park divestment, the indicative refining margin (IRM), indicative chemical margin (ICM), and associated sensitivities have been updated for Q2 2025

Corporate

• Adjusted Earnings: Expected to be in the range of $(0.6)-$(0.4) billion

The Q2 2025 outlook reflects seasonal maintenance patterns typical for the second quarter, as well as the impact of recent portfolio changes. The lower production guidance for both Integrated Gas and Upstream segments indicates significant planned maintenance activities across Shell’s global operations. The improved refinery utilization outlook suggests continuing recovery in downstream operations, though challenges persist in the chemicals business.

While specific financial guidance beyond operational metrics was limited, the company’s overall strategy continues to focus on disciplined capital allocation, portfolio optimization, and consistent shareholder returns, as outlined at its Capital Markets Day in March 2025.