Shell smashes record again with $11.5 billion profit in 2nd quarter
Shell posted record results on Thursday, with a $11.5 billion second-quarter profit smashing the mark it set only three months ago, lifted by strong gas trading and a tripling of refining profit.
The company also announced a $6 billion share buyback programme for the current quarter but did not raise its dividend of 25 cents per share.
It said shareholder returns would remain “in excess of 30 per cent of cash flow from operating activities”.
A rapid recovery in demand after the end of pandemic lockdowns and a surge in energy prices, driven by Russia’s invasion of Ukraine, have boosted profits for energy companies after a two-year slump.
Shell bought back $8.5 billion of shares in the first half of 2022 and the new programme is significantly higher than forecast.
“The strong oil price backdrop has helped Shell deliver a blockbuster set of results,” said Stuart Lamont, investment manager at Brewin Dolphin.
“The dividend may have remained the same, but the share buyback programme is positive news for shareholders,” said Stuart Lamont added.
Shell shares were up 1.6 per cent at 1115 GMT, compared with a 1.3 per cent gain for the broader European energy index.
French rival Totalenergies also reported stellar results on Thursday, with a record profit of $9.8 billion for the quarter, and accelerated its buyback programme.
Norway’s Equinor raised its special dividend and boosted share buybacks on Wednesday.
US rivals Exxon Mobil and Chevron report results on Friday.
Oil and gas prices remained elevated in the quarter, with benchmark Brent crude averaging about $114 a barrel. Benchmark European natural gas prices and global liquefied natural gas (LNG) average prices were at record highs in the quarter.
Shell’s second-quarter adjusted earnings rose to $11.47 billion, above the $11 billion forecast by analysts in a poll provided by the company.
That was up from $5.5 billion a year earlier and $9.1 billion in the first quarter of 2022.
Shell’s strong results reflected higher energy prices and refining margins, as well as strong gas and power trading, the company said, but were partly offset by lower LNG trading results.
Refining profit margins tripled in the quarter to $28 a barrel. They have weakened substantially in recent weeks on signs of easing gasoline demand in the United States and Asia.
Shell said its refinery utilisation would increase to 90-98 per cent in the third quarter, compared with 84 per cent in the second quarter.
Its oil and gas production in the second quarter was down 2 per cent from the previous quarter at 2.9 million barrels of oil equivalent per day (boepd).
Shell’s LNG liquefaction volumes stood at 7.66 million tonnes in the second quarter, down from 8 million in the previous three months. Volumes are expected to fall to between 6.9 million and 7.5 million tonnes in the third quarter because of strikes at its Australian Prelude site and planned maintenance.
Shell also said it had received a $165 million dividend payment in April from the Russian Sakhalin-2 oil and gas joint venture that it intends to exit.
The surge in cash generation was used to further reduce Shell’s debt, which stood at $46.4 billion at the end of June, down from $48.5 billion three months earlier.
Shell has broken its profit record for a second consecutive quarter and announced a $6bn share buyback scheme as the fallout from the war in Ukraine continues to generate bumper earnings for the world’s oil and gas majors.
Disruption to global commodity flows following the Russian invasion has collided with resurgent consumer demand in the first half of the year, pushing prices for oil, gas and refined petroleum products to record levels.
Shell is the first of the so-called supermajors to report its half-year results, with Exxonmobil, Chevron and BP also expected to reveal strong performances in the coming days.
Several countries, including the UK, have imposed additional taxes on energy companies this year but another round of record profits could lead to calls for additional levies.
The Uk-headquartered group, Europe’s largest oil company, reported adjusted earnings of $11.5bn in the second three months of the year, breaking the record $9.1bn posted in the first quarter. That beat average analyst estimates of $11bn and was more than double the $5.5bn it recorded a year ago.
Shell shares were up about 1 per cent in morning trading in London.
France’s Totalenergies, which also reported results on Thursday, said second-quarter profits had almost tripled to $9.8bn compared with a year earlier. In the UK, Centrica, owner of British Gas, reported a fivefold increase in operating profits during the energy crisis.
The company also announced a $6b share buyback programme for the current quarter but did not raise its dividend of 25 cents per share