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Shell PLC Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Shell delivered strong performance in 2024, with the second-highest cash flow from operations in history.
- The company strengthened its balance sheet and reduced net debt by $4.7 billion YoY, while absorbing additional leases from major projects such as LNG Canada.
- The company completed the divestment of Shell Pakistan, helping to achieve the aim of disposing of 500 sites annually.
- The company has installed more than 70,000 EV public charge points globally, achieving another aim one year ahead of schedule.
- Europe is very weak at the moment.
- Asia is softer due to price sensitivity, warmer winter, and healthy storage.
- The company is not seeing opportunities that hit its very high bar.
- The company reported loss-making in Q4 due to returning to normal volatility.
- The company expects to roll off legacy contracts over Q1, Q2, and Q3.
- The company expects to be able to buy in the markets or produce its own volumes.
- The company expects to be ahead of schedule across the majority of its key targets and ambitions.
- The company expects to generate more and more money coming through from Monaca and that will continue as they progress through the year.
- The company expects to provide more specific guidance at its upcoming Capital Markets Day.
Q&A Highlights from Shell PLC Earnings Call Q4 2024
- Analyst asked about the company's approach to radical change and access to reserves in Canada.
- Wael Sawan, CEO of Shell PLC, explained that the company's approach to radical change is to focus on consistency, delivery, and distribution, while also creating a resilient machine that can generate cash and take counter-cyclical opportunities. He also mentioned that the company has made significant progress in reducing structural costs and allocating capital more efficiently. Sinead Gorman, CFO of Shell PLC, added that the company has a focus on contingent resources and the ability to extract value across things rather than the technical aspects of reserves.
- Wael Sawan, CEO of Shell PLC, explained that the company's approach to radical change is to focus on consistency, delivery, and distribution, while also creating a resilient machine that can generate cash and take counter-cyclical opportunities. He also mentioned that the company has made significant progress in reducing structural costs and allocating capital more efficiently. Sinead Gorman, CFO of Shell PLC, added that the company has a focus on contingent resources and the ability to extract value across things rather than the technical aspects of reserves.
- Analyst asked about the company's approach to sanctioning major projects and their capital allocation framework.
- The company approaches sanctioning major projects by considering the risk profile and return of each project. They look for opportunities that align with their North Star of free cash flow per share accretion. For example, in China, they have a terrific market, a great platform, and technology that allows them to have performance products. They are building off existing platforms and considering the risk-reward balance against buybacks.
- The company approaches sanctioning major projects by considering the risk profile and return of each project. They look for opportunities that align with their North Star of free cash flow per share accretion. For example, in China, they have a terrific market, a great platform, and technology that allows them to have performance products. They are building off existing platforms and considering the risk-reward balance against buybacks.
- Analyst asked about the contribution from the Monaca cracker and where the offsets are coming from the portfolio.
- The Monaca cracker is all three up and running, and the company is focusing on both reliability and getting more products into the slate. Regional margins are different, with Europe being very weak and North America being on a mid-cycle. The company expects to see the Monaca cracker begin to show into their numbers this year.
- The Monaca cracker is all three up and running, and the company is focusing on both reliability and getting more products into the slate. Regional margins are different, with Europe being very weak and North America being on a mid-cycle. The company expects to see the Monaca cracker begin to show into their numbers this year.
- Analyst asked about the court ruling on the MD case and how it impacts the company's perspective on investing.
- The MD case did not change the company's perspective on investing, as they were already committed to their targets from a carbon perspective. The company appealed the case due to the concern that the control of strategy was advocated to be with a court in The Hague rather than the board. They were pleased with the outcome and will continue to drive investments from a prudent capital allocation basis.
- The MD case did not change the company's perspective on investing, as they were already committed to their targets from a carbon perspective. The company appealed the case due to the concern that the control of strategy was advocated to be with a court in The Hague rather than the board. They were pleased with the outcome and will continue to drive investments from a prudent capital allocation basis.
- Analyst asked about the company's approach to inorganic spending and the markets across its portfolio.
- Sinead Gorman explained that the company is focused on efficiency and avoiding unnecessary spending, and that the team has been able to absorb inflationary pressures and drive down costs. She also mentioned that the company is not seeing many opportunities that meet its high standards for value and growth, but that it is open to doing deals where it sees growth and value.
- Sinead Gorman explained that the company is focused on efficiency and avoiding unnecessary spending, and that the team has been able to absorb inflationary pressures and drive down costs. She also mentioned that the company is not seeing many opportunities that meet its high standards for value and growth, but that it is open to doing deals where it sees growth and value.
- Analyst asked about the company's approach to inorganic spending and the markets across its portfolio.
- Wael Sawan explained that the company is focused on long-term opportunities and that the LNG market is expected to grow significantly over the next few decades. He mentioned that the company is looking to take advantage of incoming LNG Canada volumes and Qatari volumes, and that it will continue to cement itself as a leader in the LNG market.
- Wael Sawan explained that the company is focused on long-term opportunities and that the LNG market is expected to grow significantly over the next few decades. He mentioned that the company is looking to take advantage of incoming LNG Canada volumes and Qatari volumes, and that it will continue to cement itself as a leader in the LNG market.
- Analyst asked about the expected completion date of the transaction and the rationale behind the company's decision to pursue the transaction.
- Wael Sawan, the CEO, stated that the company is focused on making the right decisions and building confidence in the management team, and that the market will ultimately dictate the fair share price. He also mentioned that the company has a lot to make up for, such as the dividend cut and its ability to deliver returns on capital investments. He believes that the company has a lot to offer, and that investors who believe in the company's story should hold on or buy more shares.
- Wael Sawan, the CEO, stated that the company is focused on making the right decisions and building confidence in the management team, and that the market will ultimately dictate the fair share price. He also mentioned that the company has a lot to make up for, such as the dividend cut and its ability to deliver returns on capital investments. He believes that the company has a lot to offer, and that investors who believe in the company's story should hold on or buy more shares.
- Analyst asked about the Renewable and Energy Solutions business, which has been loss-making for most of this year. The analyst wanted to know what is needed for the division to turn back into profit, and whether it's an issue of portfolio or better integration with trading, or if it's also impacted by market conditions.
- Sinead Gorman, the CFO, explained that the loss-making results in the Renewable and Energy Solutions business are due to the return to normal volatility, and that the company is focusing on high-grading its portfolio and moving towards a trading-led strategy. The company is changing its portfolio mix to include more flexible assets, such as batteries and combined cycle gas pumps. The company also announced a 4% dividend increase and $3.5 billion of share buybacks, making this 13 quarters in a row in which the company has announced buybacks of at least $3 billion. The company is focused on building a track record of delivery and aims to be the investment case through the energy transition.
- Sinead Gorman, the CFO, explained that the loss-making results in the Renewable and Energy Solutions business are due to the return to normal volatility, and that the company is focusing on high-grading its portfolio and moving towards a trading-led strategy. The company is changing its portfolio mix to include more flexible assets, such as batteries and combined cycle gas pumps. The company also announced a 4% dividend increase and $3.5 billion of share buybacks, making this 13 quarters in a row in which the company has announced buybacks of at least $3 billion. The company is focused on building a track record of delivery and aims to be the investment case through the energy transition.
