Shell’s Buyback Momentum Meets a $15 Billion Headwind

As Shell prepares to unveil its first-quarter results, the energy giant is executing the final trades of a massive share repurchase plan. On April 20 alone, the company bought back approximately 1.16 million shares through its broker, Morgan Stanley. This aggressive capital return effort is part of a $3.5 billion program set to conclude on May 1, marking the 17th consecutive quarter of such buybacks.

The strategy has provided clear support for the share price. Shell’s stock has gained over 17% since the start of the year, currently trading around €37.70. This level keeps it just below its 52-week high and comfortably above its 50-day moving average. The consistent repurchases are a core element of management’s capital discipline, directly aimed at boosting earnings per share.

However, the upcoming earnings report on May 7 is expected to reveal significant operational and balance sheet challenges. The company has pre-released a mixed set of indicative figures. While its marketing, chemicals, and renewables trading businesses are forecast to deliver significantly higher earnings than in the previous quarter, its Integrated Gas division faces headwinds. Production there is anticipated to be between 880,000 and 900,000 barrels of oil equivalent per day, dampened by lower volumes from Qatar and a slow ramp-up at a Canadian LNG project.

Should investors sell immediately? Or is it worth buying Shell?

A major concern for investors is a substantial working capital swing. Shell’s management has warned of a negative impact between $10 and $15 billion for the first quarter, driven by extreme price volatility in commodity markets that has distorted inventory and receivable values. Additionally, the accounting for long-term ship leasing contracts is expected to increase reported net debt by up to $4 billion. Although this does not represent an immediate cash outflow, it clouds the balance sheet’s appearance.

Refining margins offer a brighter spot, with indicative figures rising from $14 to $17 per barrel. The consensus of analyst estimates, to be published by Vara Research on April 29, will set the benchmark for Shell’s quarterly performance. Surpassing these expectations could propel the stock toward a new yearly high.

The shareholder calendar is packed following the earnings release. The Annual General Meeting in London on May 19 will see investors vote to authorize future share buybacks, a decision that will define the company’s capital return framework for the rest of the year. For now, the market is weighing the tailwind from relentless share repurchases against the significant financial turbulence revealed in Shell’s preliminary data.