In a bold financial strategy, Shell has significantly increased its multibillion-pound debt burden to sustain record-breaking returns for investors, despite reporting a sharp decline in annual profits driven by weaker global oil prices.
Financial Performance Under Pressure
The oil giant's adjusted earnings for 2025 plummeted by 22% to $18.5bn (£13.6bn), down from $23.7bn in the previous year. This downturn is directly attributed to steadily falling prices in the global oil market, which have squeezed profit margins across the industry.
For the final quarter of the year, Shell's earnings stood at $3.25bn, falling short of analyst expectations of $3.5bn and marking a substantial drop from the $5.4bn reported in the preceding three months. This performance highlights the ongoing challenges faced by energy companies in a volatile market environment.
Debt Pile Escalates as Payouts Continue
Despite the profit slump, Shell remains committed to rewarding its shareholders generously. The company's net debt surged to $45.7bn by the end of 2025, representing almost 21% of its total capital. This marks an increase from $41.2bn at the close of September, as oil prices continued their downward trajectory.
In a move that underscores its focus on investor returns, Shell handed shareholders a 4% increase in dividends and executed $3.5bn worth of share buybacks. Notably, this represents the 17th consecutive quarter in which the company has conducted at least $3bn of buybacks, demonstrating a consistent strategy of returning capital to investors.
Market Context and Oil Price Dynamics
The international price for crude oil dipped below $60 a barrel towards the end of 2025, marking the first time it had fallen to this level in nearly five years. This decline was partly influenced by political leaders inching towards a potential Russia-Ukraine peace deal, which could exacerbate the global market glut if western sanctions on Russian exports are lifted.
Overall, oil prices experienced a slump of almost 20% throughout 2025, recording the most significant annual loss since the Covid pandemic. This also marked the first instance of the oil market enduring three consecutive years of annual losses, reflecting broader economic and geopolitical shifts.
Leadership Perspective and Strategic Moves
Wael Sawan, Shell's chief executive, maintained an optimistic outlook, stating that the year demonstrated "accelerated momentum" for the business. He highlighted "strong operational and financial performance across Shell" as a key achievement.
"We generated free cash flow of $26bn, made significant progress in focusing our portfolio and reached $5bn of cost savings since 2022, with more to come," Sawan added, emphasising the company's efforts to streamline operations and enhance efficiency amidst challenging market conditions.
This financial approach, balancing increased debt with sustained shareholder rewards, illustrates Shell's strategic navigation of a turbulent energy landscape, where profitability pressures coexist with commitments to investor returns.
