Shell has announced record profits for the second straight quarter and a $6 billion share buyback plan as the fallout from the Ukraine war generates record profits for the world’s oil and gas majors.
Europe’s biggest oil company reported adjusted earnings, the most widely followed profit measure by analysts, of $11.5 billion in the second three months of the year, beating a record $9.1 billion in the first quarter
That beat analysts’ average estimate of $11 billion and was more than double the $5.5 billion it posted a year ago.
Shell produced less oil than in the first quarter but benefited from higher prices, reflecting the rise in the cost of crude in April, May and June following Russia’s invasion of Ukraine in February.
Higher refining margins boosted the performance of its chemicals and products business, while it also saw “exceptionally strong” earnings from its gas and power trading business.
This was partly offset by slightly weaker performance from its giant integrated gas division. Integrated gas revenue fell about 8 percent from the first quarter due to lower trading profits and a drop in liquefied natural gas volumes following its decision to exit its Sakhalin 2 LNG project in Russia
“With volatile energy markets and the ongoing need for action to tackle climate change, 2022 continues to present major challenges,” said CEO Ben van Beurden.
Shell left its dividend at $0.25 per share but said that with the $6 billion share buyback plan, total distributions to shareholders would be “significantly higher” than 30% of cash flow. cash from operations.
The new round of share buybacks follows the $8.5 billion buyback that was completed in the first half of the year.
The dividend is still well below its pre-Covid level of $0.47 per share. In 2020, Shell cut its dividend by two-thirds to $0.16, the first cut since World War II, as blockades hit demand and pushed oil prices below $20 the barrel
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Biraj Borkhataria, an analyst at RBC Capital Markets, said the lack of a dividend increase was offset by “much higher” buybacks that resulted in overall “higher-than-expected distributions.”
“With a flat dividend, it is plausible that Shell could return close to $30 billion to shareholders this year, or more than 15 percent of its market capitalization,” he said.
Cash flow from operations, excluding working capital movements, reached $23 billion in the first half of 2022, beating analysts’ average forecast of $19.2 billion. Net debt fell to $46.4 billion from $48.5 billion three months earlier.