ii view: Shell hikes dividend as profit receives Iran war boost

First-quarter results to 31 March

• Adjusted profit of $6.92 billion (£5.1 billion), up from $3.26 billion in Q4 2025
• Quarterly share buyback of $3 billion, down from $3.5 billion in Q4
• Quarterly dividend of $0.3906 per share, up 5% from Q1 last year
• Group net debt of $52.6 billion, up from $45.7 billion in Q4 2025

ii round-up:

Energy giant Shell (LSE:SHEL)l today detailed profits that beat City forecasts, driven by higher energy prices and bigger trading profits following the outbreak of war in the Middle East.

Second-quarter adjusted profit of $6.92 billion (£5.1 billion) was up from $3.26 billion in the prior fourth quarter. Analysts had expected closer to $6.4 billion. A quarterly share buyback programme of $3 billion is down from the prior quarter’s $3.5 billion, although there's a surprise 5% year-on-year increase in the quarterly dividend. That follows a 4% hike in Q4.

Shares in the FTSE 100 giant fell 2% in UK trading having come into this latest news up by close a fifth so far in 2026. The FTSE 100 index is up 4% and BP (LSE:BP.) up by a quarter. Brent crude has soared by close to two-thirds in 2026.

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Shell’s quarterly integrated gas production of 909 thousand barrels of oil equivalent per day (Kboe/d) is down from 948 Kboe/d in Q4, with management forecasting second-quarter output of as little as 580 kboe/d, hurt by conflict and operational disruption in the Middle East.

In April, Shell announced the $16.4 billion acquisition of ARC Resources, a Canadian company focused on shale production in British Columbia and Alberta.

Group net debt of $52.6 billion as of late March compares with $45.7 billion in late December, hindered by a large working capital outflow of $11.2 billion because of rising energy prices on oil stocks held.

The latest quarterly dividend of 39.06 US cents is due to be paid to eligible shareholders on 29 June.

Second-quarter results are scheduled for 30 July.

ii view:

Competing against rivals such as TotalEnergies SE (EURONEXT:TTE) and Exxon Mobil Corp (NYSE:XOM), Shell shortened its name from Royal Dutch Shell in 2022, moving its headquarters from the Netherlands to the UK. The group employs around 85,000 people across more than 70 countries. Alongside upstream exploration and production operations, downstream operations serve around 29 million retail customers a day. Electric vehicle (EV) charge points total around 88,000.

For investors, reduced production and higher costs caused by the war in the Middle East now warrant consideration. Higher inflation because of soaring energy prices may now cause interest rates to stay higher for longer, dampening economic activity and reducing energy demand. The rebalance of returns to shareholders reduces total distributions, while further oil and gas price volatility may accelerate government moves globally to diversify energy supplies by switching to alternatives like nuclear power.  

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On the upside, reduced Middle East oil exports and shipping supply challenges will likely support fossil fuel prices, at least near-term. Strategic focuses outlined in March 2025 include becoming the world’s leading integrated gas and Liquefied Natural Gas (LNG) business, as well as making Shell simpler, more resilient and more competitive. Structural cost reductions now exceed $5 billion since 2022, while a diversity of operations regularly allows one area of strength to counter another of weakness.

For now, an ongoing push to end the war in the Middle East could cause further energy price volatility, potentially with a fall in oil prices. That said, the world’s addiction to oil plus a forecast dividend yield of around 3.5% continue to justify Shell's place in investor portfolios.    

Positives:

• Diversity of operations
• Focus on shareholder returns

Negatives:

• Uncertain economic outlook
• The weather can raise operational challenges

The average rating of stock market analysts:

Strong hold