Shell profits slump as oil and gas prices fall
The FTSE 100 energy giant told investors adjusted earnings fell 32 per cent to $4.3billion (£3.2billion) over the three months to 30 June.
However, the result solidly surpassed analyst forecasts of $3.74billion, reflecting the group's cost efficiency efforts and helping to lift Shell shares on Thursday.
Global benchmark Brent crude prices averaged around $67 a barrel during the quarter, against $75 a barrel in the first quarter and $85 a year earlier.
Crude oil prices fell in the quarter as OPEC+, comprised of the Organization of the Petroleum Exporting Countries and allies such as Russia, began unwinding self-imposed production cuts aimed at supporting the market.
Their most recent decision called for an oil output increase of 548,000 barrels per day in August.
In a previous update, Shell said it expected earnings to be hit by weaker trading in its integrated gas division and losses at its chemicals and products operations after an outage at its US Monaca polymer plant.
On Thursday, Shell posted a 30 per cent fall in adjusted earnings across its integrated gas division in the period, when compared to the first quarter. The fall emerged against a backdrop of weaker trading and lower prices.
Adjusted earnings in the company's upstream business fell 26 per cent quarter-on-quarter, while its chemicals and products arm saw adjusted earnings drop 74 per cent quarter-on-quarter.
Most renewables and energy solutions activities were loss-making.
In a bid to focus on 'performance, discipline and simplification', Shell has reduced its costs by $3.9billion compared to 2022.
On Thursday, the oil giant said it would maintain the pace of its share buyback programme at $3.5billion over the next three months, representing the fifteenth consecutive quarter of at least $3billion.
Shell reported cash flow from operating activities of $11.9billion, which was ahead of a consensus figure of $11.4billion, and down from $13.5billion a year ago.
Together with $2.1billion in dividends, that brings shareholder distributions to 46 per cent of operating cashflow, within its 40 to 50 per cent guided range.
Wael Sawan, Shell's chief executive, said: 'Shell generated robust cash flows reflecting strong operational performance in a less favourable macro environment.
'We continued to deliver on our strategy by enhancing our deep-water portfolio in Nigeria and Brazil, and achieved a key milestone by shipping the first cargo from LNG Canada.'
He added: 'Our continued focus on performance, discipline and simplification helped deliver $3.9billion of structural cost reductions since 2022, with the majority delivered through non-portfolio actions.'
The update came amid a backdrop of cooling profits across the oil and gas sector, which had surged to record levels in 2022.
The industry has since been hit by weaker crude prices, a subdued demand outlook, and geopolitical volatility, including shifting US trade policy under president Donald Trump.
Last month, Shell said it had not submitted a bid for rival BP and was not actively considering such a move.
Shell said in a statement in June: 'In response to recent media speculation Shell wishes to clarify that it has not been actively considering making an offer for BP and confirms it has not made an approach to, and no talks have taken place with BP with regards to a possible offer.'
Mark Crouch, an analyst at eToro, said: 'Shell delivered results that, while down on last year's bumper profits, comfortably exceeded analyst expectations.
'In a weaker oil price environment, the group's performance has been notably resilient, drawing favourable comparison with US peers rather than its more volatile UK counterpart, BP.
'Shell's strategy of prioritising capital discipline, operational efficiency and shareholder returns, continues to underpin its stability.
'The company has resisted pressure to pivot aggressively into renewables, instead maintaining a firm focus on its core oil and gas operations.
'That decision, once criticised, now appears more justified as profitability remains robust and capital returns remain attractive.'
Shell shares rose 2.78 per cent or 74.50p to 2,753.50p on Thursday, having slipped 3 per cent in the past year.
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