Shell Reports $6.2 Billion Profit for Q3
British oil company Shell announced on Thursday that it achieved a profit of $6.2 billion in the third quarter. This result was in line with expectations and can be attributed to higher oil prices and refining margins.
Analysts had predicted adjusted earnings of $6.48 billion, according to a consensus compiled by LSEG.
Although the profit was higher than the $5.1 billion reported in the second quarter, it marked a significant decline from the $9.45 billion profit reported a year ago. The previous year’s profit was boosted by the Russia-Ukraine conflict, which led to increased oil and gas prices.
In addition to the financial results, Shell also announced a $3.5 billion share buyback program that will take place over the next three months. Shell CEO Wael Sawan stated that the $6.5 billion allocated for the second half of the year exceeds the $5 billion previously announced in June.
Sawan added, “Shell delivered another quarter of strong operational and financial performance, capturing opportunities in volatile commodity markets.”
Free cash flow decreased from $12.1 billion in the second quarter to $7.5 billion, while cash capital expenditure rose from $5.1 billion to $5.6 billion.
Energy Majors Experience Record Profits
Last year saw record profits for energy companies, driven by soaring fossil fuel prices.
Oil prices have continued to rise sharply in the third quarter of 2023 due to factors such as supply cuts from Saudi Arabia and Russia. The International Energy Agency has also warned that oil markets will remain uncertain due to escalating conflicts in the Middle East.
BP, another major oil company, reported a year-on-year decline in third-quarter profit from $8.15 billion to $3.293 billion, falling below analyst estimates. However, France’s TotalEnergies performed slightly better last week.
While BP attributed its muted quarterly performance to weakness in gas marketing and trading, Shell stated that its integrated gas division performed steadily, with favorable trading.
On the other hand, Shell’s renewables and energy solutions division reported a loss of $67 million, which was attributed to seasonal effects and lower trading margins. The division’s capital expenditure amounted to $659 million.
These results come amid criticism of Shell’s decarbonization program, including from some of its shareholders. Last week, Shell confirmed plans to cut 200 positions within its low-carbon solutions unit by 2024.
“While another share buyback is good news for shareholders, there is little mention of the company’s plans to achieve net zero in today’s update. This remains a longer-term concern for many, especially after Shell’s decision to prioritize oil and gas production earlier this year,” commented Stuart Lamont, an investment manager at RBC Brewin Dolphin.
Lamont added, “With the geopolitical environment still volatile, oil prices are likely to continue rising, which should result in a strong final quarter for Shell.”
As of 8:30 a.m. on Thursday, Shell’s shares on the London Stock Exchange were 1.1% higher.