The Shell (LSE: SHEL) share price has taken a hammering. As oil and gas prices slide, so does the stock. With Brent crude now trading near $60 a barrel, the FTSE 100 energy giant’s feeling the strain.
Over the last month, Shell’s share price has slumped 12.73%, and it’s down almost 15% over 12 months.
It’s a happier picture for long-term investors. Over five years, the shares are up 85%, and when reinvesting dividends, the total return edges closer to 115%. That’s the sort of reward that comes with sticking around through the sector’s natural cycles, even when sentiment’s weak.
Still pumping cash
Shell’s business isn’t running on empty. In 2024, it generated free cash flow of $39.5bn, up from the previous year, despite a weaker pricing environment. Cash flow from operations came in at $54.7bn. That’s hardly a company in distress.
It’s been busy returning that cash too, via dividends and share buybacks. Shareholders received $22.6bn last year, equal to 41% of total operating cash.
The current share price slump has also dragged the valuation down to just 8.7 times earnings. That’s close to half the FTSE 100 average. It’s in bargain territory. The dividend yield has risen to 4.4% as a result, which looks increasingly appealing as interest rates begin to fall.
While there are concerns around Shell’s pivot away from earlier green energy commitments. It’s shifting towards higher-return projects while still investing in the net zero transition. Gas remains central, both for Shell and the global energy mix, especially as power demand from AI and electrification surges.
Short-term clouds
There are issues, of course. In its April update, Shell lowered its LNG production outlook due to cyclones and unplanned maintenance in Australia. That’s not ideal given gas is a core business strength.
It also flagged a $100m exploration well write-off, and it’s not the only cutback. Shell’s aiming to remove between $5bn and $7bn of annual costs by 2028, with $3.1bn already stripped out since 2022. That shows discipline.
Obviously, tariffs from the US have hit commodity markets hard. If the US falls into recession, and the rest of the world slows, oil could fall further. Shell has held up better than FTSE 100 rival BP, whose shares are down 33% in the last 12 months, but it hasn’t been immune to the turbulence.
Looking ahead
Analysts see Shell shares rising to a median target of 3,042p within a year. That’s 25% higher than today, which would be pretty sweet if it happens. Add in the dividend, and total returns could near 30%. Those numbers rely on a more stable world, of course, and forecasts can change quickly.
For long-term investors though, this may be a moment of opportunity. Energy demand isn’t going away, even as the mix shifts. Shell’s well-positioned, profitable and cheap by historic standards. It’s hard to call the bottom in a sector like this. It always is.
But I can see why investors would consider buying today’s short-term dip. I’d buy it myself, but I’m playing the energy sector cyclical swing via BP. So far, I’m not doing well.
