Royal Dutch Shell has revealed a doubling in profits but investors were left disappointed by the oil major's failure to commit to buying back shares.
A rally in the oil market last year boosted Shell's cash flows enough to restart full dividend payouts for shareholders. However a dip in cashflow in the fourth quarter meant that management refused to say when it would begin to buy back the shares it paid out in lieu of dividends during the market rout.
Shares in the FTSE 100 group fell more than 2pc to £24.43 after Shell revealed free cash flow a fifth lower than in the same quarter in 2016, at $7.25bn (£5.1bn), despite the market rally. The underwhelming result falls significantly short of analyst forecasts of around $10bn.
Analysts admitted the cash flow slowdown would delay buybacks despite the surge in profits at the group.
Royal Dutch Shell share
The group’s earnings on a ‘current cost of supply’ (CCS) basis, a standard oil industry measure, more than doubled from the previous year to reach $15.8bn (£11bn) for 2017. For the final quarter of last year alone Shell’s earnings reached $4.3bn, from less than $2bn the year before.
Shell boss Ben Van Beurden said the results were due to a “relentless” focus on competitiveness, which yielded “a year of transformation” for the group.
“We enter 2018 with continued discipline and confidence, committed to the delivery of strong returns and cash,” he assured investors.
The group has undertaken a major overhaul of its business after oil prices plunged to multi-year lows following its mega-deal to take over BG Group in 2016.
Mr Van Beurden said the group was “pretty close” to completing its ambitious $30bn programme to sell off oil assets that are peripheral to the business and has cut debt by $12bn in the last year alone.
He said that $24bn worth of sales were now complete and more than $6bn had been announced or was in advanced progress.
Shell is already on the hunt for new deals to snap up minnows involved in clean fuels and electricity as part of its plan to cut its total carbon emissions in half by 2050.
Mr Van Beurden confirmed that the group would spend $1bn to $2bn every year in new energy technologies after two acquisitions in the electric vehicle charging space and following its purchase of energy supplier First Utility, a challenger to the 'Big Six' firms of Npower, EDF, SSE, British Gas, Eon and Scottish Power.
The deal is part of the group’s plan to build an ‘integrated’ presence in the power market with generation assets, trading capabilities and power customers.
“We understand the challenges in the UK power market. But these are challenges for the Big Six, not the people who take on the Big Six,” Mr Van Beurden said.