Shell PLC saw its shares close slightly higher in London trading on Friday, gaining 0.2% to finish at 2,774.50 pence. The move followed an announcement from CEO Wael Sawan that the energy giant will suspend new investment commitments in Kazakhstan. This decision stems from protracted legal conflicts concerning substantial cost overruns at major projects in the region.
Legal Headwinds in Central Asia
The company faces arbitration claims from Kazakhstan totaling billions. The disputes center on the Kashagan and Karachaganak fields, with the nation seeking approximately $13 billion and $3.5 billion, respectively. Industry sources suggest a potential arbitration award for Karachaganak could range between $2 billion and $4 billion, introducing significant financial uncertainty.
Earnings and Shareholder Returns
Shell reported fourth-quarter earnings of $3.3 billion this week, a figure that fell short of analyst expectations. Despite the profit miss, the company maintained its commitment to shareholder returns. It held its quarterly share buyback program steady at $3.5 billion and increased its dividend by 4% to $0.372 per share. Chief Financial Officer Sinead Gorman emphasized the company's dedication to this payout framework.
Auditor Transition and Regulatory Scrutiny
In a separate governance development, Shell will change its auditor. PricewaterhouseCoopers (PwC) will take over from Ernst & Young (EY) starting with the 2027 financial year. This shift follows regulatory examination by the UK's Financial Reporting Council (FRC) into audit partner rotation rules. The FRC launched an investigation in December related to EY's work on Shell's 2024 accounts after the company identified a compliance breach. Shell stated its financial statements remain accurate but will amend its 2023 and 2024 annual reports accordingly.
Looking ahead, investors will monitor developments in the Kazakhstan arbitrations, which could pressure cash reserves and influence future capital allocation if settlements exceed expectations. The company's ordinary shares will trade ex-dividend on February 19, with payment scheduled for March 30. Meanwhile, Brent crude oil prices rose 0.74% to $68.05 a barrel on Friday amid persistent geopolitical concerns.
