SHELL has reported a sharp fall in profits after gas prices steadily dropped following the heights reached in the aftermath of Russia’s invasion of Ukraine in 2022.

But the company’s performance over 2023 was better than forecast, with the energy giant cheering investors by increasing its dividend and starting a share buyback programme worth $3.5 billion, adding to the bumper pay-outs made to shareholders last year.

Shell became the focus of protests from environmental campaigners, trade unions, and anti-poverty campaigners when surging gas prices sparked by Putin’s war on Ukraine helped it report profits of $39.9bn in 2022 – the highest in the company’s 115-year history.

Critics said the energy major was profiting as people were falling into fuel poverty, as the energy price cap set by regulator Ofgem was raised to record levels. Opponents have also argued that the windfall tax introduced by the UK Government to curb excess profits did not go far enough.

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While the war in Ukraine rages on, oil and gas prices gradually fell throughout 2023. Shell reported adjusted earnings of £28.2bn for the year, down around 30% on 2022 but ahead of City expectations after better-than-expected earnings of $7.3bn in the final quarter. The City had pencilled in fourth-quarter profits of around $6bn.

Shares in the company, which remains one of the biggest oil and gas producers in the North Sea, rose more than 2% as Shell said it would increase dividends by 4% per share for the fourth quarter and start a further buyback. It returned $23bn to shareholders in 2023.

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “Shell had flagged much of the headline news ahead of today’s results, so the impact of impairment charges comes as no surprise. Stronger liquefied natural gas trading and wider operational performance has offset this to a degree and helped the company beat expectations for the full year.

“Debt ticking up will be a slight concern in the current environment, but this should be brought down by future divestments. Shell remains well-rated by analysts and another share buyback and increasing dividend are good news for shareholders. Longer-term, there will be more questions about its plans to transition to net zero, which receive little mention in this latest update.”

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Shell has faced regular criticism that it prioritises shareholder returns over net-zero goals and its green credentials were in focus again yesterday, as Greenpeace activists protested outside its London headquarters, dressed as partying board members. The campaigners said the oil group should pay some of its profits into a fund agreed at Cop28 climate talks last month to help pay for loss and damage caused by climate change.

Steve Clayton, head of equity funds at stockbroker Hargreaves Lansdown, said: "[Shell] CEO Wael Sawan said that 2024 would see Shell ‘continuing to simplify our organisation with a focus on delivering more value with less emissions’. That’s not the same as saying Shell will be driven by green energy production.

"In the quarter, the group earned a total of $7.3bn of net income, of which just $155m came from their renewables and energy solutions division. This highlights the challenges Big Oil faces; they wouldn’t be called Big Oil if they did not have substantial hydrocarbon businesses, and however much they might wish to be green energy producers, their assets are long-lived and finding alternative, financially attractive, but also greener projects to recycle capital into over the course of the energy transition is a challenge."

Shell said on it was "progressing towards its goal of achieving net-zero emissions by 2050" and would give an update on its energy transition strategy on March 14.

Mr Sawan said: "Shell delivered another quarter of strong performance, concluding a year in which we made good progress.

 "As we enter 2024, we are continuing to simplify our organisation with a focus on delivering more value with less emissions.”

Shares in Shell closed up 2.41%, or 59p, 2,506p.