Shell 4Q23 Results | Climate Transition Analysis
4Q23 marks one year since Wael Sawan took the helm as Shell’s CEO.
FY23 results reflect Shell’s strategic shift towards more conservative capital allocation, scaling back renewables in favour of low-carbon molecules, and increasing shareholder distributions.
Shell will be releasing its transition plan on March 14th, with an advisory vote on its transition plan at its May 21st AGM. Based on FY23 results, we expect a wholesale change to Shell’s transition strategy and emissions targets to better reflect its narrowed approach to low carbon.
Key findings
Capex for FY23 was $24.4bn, -2% from FY22, in line with guidance. Renewables and Energy Solutions (R&ES) capex declined 23% to $2.7bn, and total capex for Low-carbon energy solutions (incl renewables within R&ES segment) increased 30% to $5.6bn.
For the first time Shell provided clear guidance on capex for Low-carbon energy solutions of $10-15bn FY23-FY25 (implies $2.2-4.7bn pa. for FY24-25). This will make assessing transition performance easier, given gas based power is a large contributor to R&ES capex.
The swing away from renewables is evident. As a percentage of group capex, Renewables & Energy Solutions hit a 3-year low of 11% in FY23, while Upstream hit a 3-year high of 34%. Shell’s total renewables pipeline declined 9% in FY23 to 46.8 GW. This compares to BP (+16%) and Total (+17%) YTD, signaling a divergence from integrated peers.
Net carbon intensity targets set by its prior CEO (20% by FY30) appear unachievable to us, with only -3.8% delivered as of FY22.
