Shell PLC (LSE:SHEL, NYSE:SHEL) is promising more money for shareholders, a leaner investment plan and a tighter focus on its most profitable businesses.
But for all the pledges, some investors remain unconvinced that Europe’s biggest energy group has the clearest roadmap for long-term value.
At its Capital Markets Day on Tuesday, the oil and gas company raised its capital return target, reduced its investment budget, and signalled a retreat from parts of the chemicals business.
The headline message was simple: Shell is undervalued, and management wants the share price to reflect more of the cash it generates.
But that pitch leaves open a bigger question: what kind of energy company does Shell want to be?
Analysts at Citi said Shell’s strategy was “message value claims” but queried whether the company had made a convincing case for leadership among its European peers.
“Yes, there is a discount to US international oil companies - European energy is about 40% cheaper - but we continue to argue the discount is largely a function of a difference in the cost of equity,” Citi wrote. “Has Shell given enough ammunition to support that it should be the premier boat on that tide?”
The Anglo-Dutch giant is leaning heavily on its position in liquefied natural gas (LNG), where it wants to be the dominant global player. But the rest of the business is more mixed. Citi expects overall growth in cash flow from operations (CFFO) of just 2.5% a year.
UBS, by contrast, saw more to like. “We saw a number of positive features from the event,” the bank said in a note, pointing to an increased shareholder payout range of 40–50% of CFFO, up from 30–40% previously, and a “clear priority” for buybacks.
The company signalled it could repurchase up to 40 per cent of its shares by the end of the decade, having already bought back 20 per cent since 2021.
Shell also trimmed its capital expenditure guidance to $20bn–$22bn per year for 2025–28, an 11% cut on previous plans. That reflects lower expected spend in downstream and renewables, as well as more discipline on acquisitions.
In chemicals, the company is pulling back. It does not see itself as a “natural owner” of many of these assets and is looking at partnerships or exits, particularly in the US and Europe. The goal is to free up capital for higher-return parts of the business.
Still, with the dividend per share up 16% annually over the past three years, and Shell pledging it can sustain returns even with oil at $40 a barrel, the financials may prove more persuasive than the strategy — at least for now.
In afternoon trading, the stock was up 2.3% at 2,828.75p.