Numerous eyes are fastened on the Shell (LSE:SHEL) share price as we strategy the agency’s extremely anticipated capital markets day later this month. Shares of the oil & fuel big have been pretty stagnant over the previous yr, solely rising by round 4%.

This holding sample seems to be linked to each combined outcomes and traders eagerly awaiting the revealing of CEO Wael Sawan’s subsequent steps within the technique to “deliver more value with less emissions”.

But that also hasn’t stopped some institutional analysts from speculating the place the inventory price might go by this time subsequent yr. And for essentially the most half, sentiment seems to be fairly bullish, with a median 12-month price goal of three,253.49p.

If these predictions show correct, then investing £1,000 proper now might develop to £1,264 in a yr’s time. And that’s earlier than contemplating the additional positive aspects from dividends paid over the interval. However what’s driving these expectations?

Greater financial savings, decrease income

Earnings attributable to shareholders in 2024 shrank by 17% and got here in decrease than expectations. The trigger wasn’t because of disruptions in manufacturing. In actual fact, the barrels of oil equivalents per day (boepd) expanded by 2% in the course of the yr. As a substitute, targets had been missed on the again of falling oil & fuel costs, leading to its downstream margins getting squeezed.

Nevertheless, regardless of earnings shifting within the fallacious course, administration appears to be getting its prices below management. Capital expenditure all year long truly got here in decrease than anticipated at $21.1bn versus the $22bn-$25bn traders had been anticipating. This additionally marks a 13.6% discount in comparison with 2023, enabling money movement from working actions to return in flat, rising by 1% even with decrease income.

Subsequently, administration’s used this flexibility to pay down its debt from $81.5bn to $77.1bn. When factoring within the group’s spare money & equivalents, Shell’s internet debt place has fallen from $43.5bn to $38.8bn, bettering the gearing from 18.8% to 17.7%.

These are all encouraging indicators of a more healthy stability sheet. And it probably explains why administration was snug launching a brand new $3.5bn share buyback programme together with giving a 4% bump to dividends again in January.

What now?

Improved capital allocation and better annualised financial savings are a welcome sight for shareholders. And may oil costs begin rising once more, Shell appears on monitor to turn into a leaner, extra worthwhile operation in the long term.

Nevertheless, it’s necessary to do not forget that oil costs are notoriously cyclical. In latest weeks, the price of hydrocarbons has been steadily falling, placing additional strain on Shell’s revenue margins. And may this development proceed, 2025 might show to be one other difficult yr.

Personally, I imagine Shell has some fascinating potential forward, relying on the imaginative and prescient of Sawan. Buyers will quickly uncover precisely what he has deliberate on 25 March in the course of the capital markets day. So till then, I’m not speeding so as to add any Shell shares to my portfolio, even with bullish predictions coming from analysts.