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Shell has announced another $3.5bn of share buybacks after its quarterly profits exceeded market expectations.
Europe’s largest oil and gas company reported adjusted earnings of $6bn for the third quarter, beating average analyst estimates of $5.4bn, as increased gas production offset lower oil prices and weaker refining margins.
Shell, like some of its rivals, has used bumper profits from the past two years to embark on a huge share repurchasing scheme. It distributed $23bn to shareholders last year, representing more than 42 per cent of cash flow from operations.
Shell said on Thursday that this was the 12th consecutive quarter that the company had announced $3bn or more of share buybacks. It maintained its dividend at $0.34 a share and its stock price was steady in early morning London trade.
Since taking over in January 2023, chief executive Wael Sawan has sought to improve financial performance by cutting costs and simplifying Shell’s approach to the energy transition.
That process has involved streamlining the senior management team, re-emphasising the oil and gas business and trimming less profitable parts of the company’s low-carbon portfolio.
In line with those plans, Shell said capital expenditure for 2024 would be at “the lower end” of the previously outlined range of $22bn-$25bn. Net debt fell by $3.1bn from the previous quarter to $35.2bn.
“We see this is a strong set of numbers once again,” said Biraj Borkhataria at RBC Capital Markets, adding that Shell’s falling net debt should leave the company well positioned to maintain current levels of shareholder returns even if oil and gas prices are lower into next year. “We continue to see Shell’s distribution programme as being more resilient than peers given its fortress balance sheet.”
BP on Tuesday signalled it would “review” its expectations for 2025 share buybacks in February, with analysts forecasting a probable drop in the level of shareholder returns as lower commodity prices weigh on group performance. Its shares closed down 5 per cent on the day.
Shell has previously said it aims to maintain a target of returning 30 to 40 per cent of operating cash flow to shareholders even if oil prices fall as low as $50 a barrel. Brent crude, the international benchmark, is currently trading at about $72 a barrel.
The biggest contributor to group profits was once again Shell’s integrated gas division, which reported quarterly earnings of $2.9bn thanks to increased liquefied natural gas production.
In the upstream division focused on exploration and production, weaker oil prices were offset by greater operational efficiency, delivering adjusted earnings of $2.4bn, up from $2.3bn in the previous quarter.
But earnings in the chemicals and products division, which includes refining, slumped to $463mn from $1.1bn in the previous quarter, driven by lower margins due to increased supply in the market, it said.
Separately, investments in its renewables and energy solutions division fell to 8 per cent of group-wide capital expenditure in the third quarter, down from 10 per cent across 2023 and 15 per cent across 2022.
Mark van Baal, founder of activist green shareholder Follow This, warned that the drop in spending on renewables showed Shell was “increasing reliance on fossil fuels” seven years after committing to transition the business to selling greener products.
