Shell(SHEL.US)Q4 profits hit a five-year low: chemical sector "bleeding," oil trading stalls, can the $3.5 billion buyback save the day?

Global energy giant Shell (SHEL.US) released its Q4 and full-year 2025 earnings report. The report shows that Shell’s adjusted profit for the fourth quarter reached $3.26 billion, down 11% compared to the same period last year. This figure not only fell short of the market’s previous consensus estimate of $3.53 billion but also marked the lowest quarterly profit since Q1 2021. Declining crude oil prices, poor trading performance, and difficulties in the chemical business collectively pressured Shell’s profitability.

In terms of revenue, Shell’s total revenue for Q4 was $64.093 billion, a slight decrease of approximately 3.3% from $66.281 billion in the same period of 2024. Excluding one-time items, its adjusted earnings per share were $0.57, slightly below the $0.60 in the same quarter of 2024 and not meeting analysts’ previous expectations of between $0.69 and $1.29.

Looking at the full year, the company achieved an adjusted profit of $18.53 billion in 2025, a significant decline of about 22% from $23.72 billion in 2024. Despite the notable drop in profitability, Shell maintained a relatively aggressive shareholder return strategy. The company announced a 4% increase in Q4 dividends to $0.372 per share and launched a $3.5 billion share repurchase program, expected to be completed before the next quarterly earnings release.

Shell CEO Wael Sawan stated that the company has cut costs by a total of $5.1 billion through structural reforms since the end of 2022, achieving its initial target ahead of schedule. This provides a solid defensive position for the company to maintain stable cash dividends in a low oil price environment.

At the operational level, Shell’s profit structure shows a clear polarization. Natural gas and upstream businesses remain the core profit drivers, demonstrating strong cash generation capabilities, while chemicals and products reported a loss of $66 million in Q4. By the end of 2025, the company’s debt-to-asset ratio increased to 20.7%, with net debt rising to $45.7 billion.

Following cost reductions and the divestment of underperforming assets, investors are increasingly focused on Shell’s growth prospects. For 2026, Shell expects annual capital expenditures to remain in the range of $20 billion to $22 billion, with actual spending in 2025 slightly below that range. Sawan and CFO Sinead Gorman have been tightening Shell’s spending for the past three years.

In terms of oil and gas production, the company’s quarterly output grew 2% year-over-year, but lagged behind U.S. peers. Chevron (CVX.US) saw a 20% increase in Q4 output, driven by Kazakhstan projects and the integration of Hess assets. ExxonMobil (XOM.US) expanded production by 15%, supported by the Permian Basin and its massive Guyana project.

Brazil and the Gulf of Mexico are key to Shell’s production, as is its new joint venture with Norway’s Equinor (EQNR.US) in the North Sea. However, investor enthusiasm for these projects is less than that for Exxon and Chevron. Elsewhere in the world, Shell is seeking commercial pathways for its Namibia oil discovery and has re-entered Libya’s fossil fuel development sector.

In 2025, due to increased production within and outside OPEC+, the market widely expected a supply glut this year, leading to an 18% plunge in oil prices. Since 2026, benchmark Brent futures have recovered some ground, trading around $68 per barrel, with geopolitical risks from US-Iran tensions adding a premium. Nonetheless, prices remain well below the over $80 high seen in 2025.

Notably, analysts had previously lowered expectations after Shell’s January earnings update warned that quarterly oil trading “significantly underperformed” the previous quarter, and the struggling chemical sector posted losses. Despite this, profits still fell short.

The chemical sector’s heavy losses offset gains from refining margins—at the end of last month, when ExxonMobil reported improved refining margins, it benefited the company. Persistent underperformance in chemicals has been a drag on profits, and Sawan has promised to address this, though he warned it could be a lengthy process.

Meanwhile, strong performance from US competitors has increased pressure on Shell. This year, ExxonMobil and Chevron’s stock prices surged due to robust production from Guyana, the Permian Basin, and low-cost fields in Kazakhstan, making Sawan’s goal to narrow the valuation gap with these companies more difficult. Last year, in dollar terms, Shell’s stock was the best performer among the world’s top five oil majors, but since mid-November, gains have gradually faded, and in 2026 so far, Shell has lagged behind its peers.