Shell Plc (SHEL) shares dropped Thursday after the energy giant delivered fourth-quarter fiscal 2025 results that painted a mixed picture. The headline numbers tell the story: earnings beat expectations, but it was still the company's weakest quarterly showing in nearly five years.

The Numbers

Adjusted earnings per American Depositary Share came in at $1.14, handily beating the consensus estimate of 63 cents. That sounds great until you look at the bigger picture. Total adjusted earnings reached just $3.3 billion, down both year over year and sequentially. According to reports, this marks Shell's weakest quarterly result since the first three months of 2021, when adjusted earnings came in at $3.2 billion.

The culprits? Lower crude prices combined with unfavorable tax adjustments that hit the company hard in the fourth quarter. Revenue also disappointed at $64.09 billion, falling short of analysts' forecast of $64.61 billion.

"I'd start off by saying it was actually a very strong operational quarter for us," Shell CEO Wael Sawan told CNBC's Squawk Box Europe on Thursday, putting the best face on things.

"A few things hurt us this quarter. Number one was some tax adjustments which went against us, chemicals has indeed been weak, but I would look to the strength actually of our integrated gas, upstream and marketing businesses," Sawan explained.

The company generated $9.4 billion in cash flow from operations during the quarter, which helps explain why management remains upbeat despite the profit decline.

Breaking Down the Segments

The operational story was decidedly mixed across Shell's various businesses. Integrated Gas production rose 2% quarter over quarter to 948,000 barrels of oil equivalent per day, while LNG liquefaction volumes edged up 7% sequentially to 7.81 million metric tons. Those are solid gains.

But pricing told a different story. Realized liquids prices dipped to $55 per barrel from $58 per barrel in the previous quarter, while gas prices declined to $6.8 from $7.3 per thousand standard cubic feet. When your volumes go up but your prices go down, you're essentially running harder to stay in place.

Marketing sales volumes declined sequentially to 2.70 million barrels per day from 2.82 million barrels per day. The Mobility segment output fell slightly to 1.96 million b/d from 2.06 million b/d in the prior quarter, Lubricants decreased to 83,000 b/d from 88,000 b/d, and Sectors & Decarbonisation fell to 658,000 b/d from 681,000 b/d in the prior quarter.

Rewarding Shareholders Despite the Headwinds

Here's where things get interesting. Despite the profit squeeze, Shell isn't pulling back on shareholder distributions. Total shareholder distributions stood at $5.5 billion for the quarter, including $3.4 billion of repurchases and $2.1 billion in cash dividends.

The company announced a new $3.5 billion share buyback programme, which is expected to be completed before the announcement of first-quarter fiscal 2026 results. Shell also increased its dividend by 4% to 37.2 cents per share, payable on March 30 to shareholders of record as of February 20, 2026.

That's a pretty confident move for a company that just posted its weakest quarterly profit in nearly five years. Then again, Shell generated $26 billion in free cash flow for the full year 2025 and hit $5 billion in cost savings since 2022, so maybe the confidence is warranted.

At the end of the quarter, net debt stood at $45.7 billion, up from $41.2 billion in the third quarter, with gearing expanding to 20.7% from 18.8% in the previous quarter.

Looking Ahead

In a statement, Sawan emphasized the full-year achievements: "2025 was a year of accelerated momentum, with strong operational and financial performance across Shell. We generated free cash flow of $26 billion, made significant progress in focusing our portfolio and reached $5 billion of cost savings since 2022, with more to come."

For the first quarter of 2026, Shell expects Integrated Gas production of 920 to 980 thousand boe/d and LNG liquefaction volumes of 7.4 to 8.0 million tons. Upstream volumes are projected at 1.70 to 1.90 million boe/d, while Marketing volumes should range within 2.55 to 2.75 million b/d.

Refinery utilization is forecast between 90% and 98%, while Chemicals plant utilization is expected to fall between 79% and 87% in the quarter. For fiscal 2026, capital expenditures are pegged at $20 billion to $22 billion.

Shell (SHEL) Price Action: Shell shares were down 2.78% at $76.59 during premarket trading on Thursday.