OF THE two UK oil majors, Shell has been the quieter of late.

But investors and shareholders will be keeping a close eye on Shell ahead of its update on Thursday. General sentiment appears geared towards profits returning to earth for 2023 against 2022 levels.

The projected severity of the full-year fall varies from 40 per cent to around 30 per cent but with oil trading at around an $82 per barrel average through last year against $100 the year prior, returns will almost certainly come in lower.

Estimates for the full-year are tabled at around £21bn, with £4.75bn coming in Q4 which would mark a near-40 per cent decline. Earlier this month, the company caveated its upcoming Q4 figures with a mixed trading update.

Profits are expected to be hit as a result of a non-cash impairment charge of $2.4-2.5bn and the chemicals unit is set to continue to drag on overall profitability.

Gas production, however, is set to be "significantly" higher than the third quarter thanks to seasonality and opportunities.

The conversation will inevitably turn back to sustainability at some point and in this sense, Shell may not be as far removed from the situation facing BP as first appears.

A dip in oil and gas production isn't expected to be announced, a fact shareholders will enjoy. But they will also likely be keeping a close eye on where 2024's cash allocation will lie and if it shows an awareness and commitment to driving renewable development.

In July last year the company abandoned a cornerstone green pledge; to reduce oil production by one to two per cent each year until 2030, The very real question facing Shell is if the enormous payout rates established unapologetically through Wael Sawan's first year at the helm are sustainable.

Jefferies analyst Giacomo Romeo said last month the company had provided a poor outlook for its cash flow from operation that leads to concerns around the company's ability to maintain the current level of buybacks, which totalled $3.5bn for the three months from November to end of January. That level is incongruous to the necessary energy transition drive that supermajors are coming under pressure to devote capital to championing.

(c) 2024 City A.M., source Newspaper