A general view of a sign at a Shell gas station in Milton Keynes, Britain, January 5, 2022. REUTERS/Andrew Boyers/File Photo GLOBAL BUSINESS WEEK AHEAD
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- Shell announced a $6 billion buyback program
- Refining margins tripled in the second quarter
- Strong gas and power trading boosts earnings
LONDON, July 28 (Reuters) – Shell ( SHEL.L ) on Thursday reported second-quarter profit of $11.5 billion, breaking its previous record just three months earlier, lifted by a tripling of refining profits and strong trading in gas.
The company also announced a $6 billion share buyback program for the current quarter, but did not increase its dividend of 25 cents per share. It said shareholder returns would remain “above 30% of cash flow from operating activities”.
A rapid recovery in demand after the end of the pandemic lockdown and a surge in energy prices triggered by Russia’s invasion of Ukraine boosted profits at energy companies after a two-year slump. Read more
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Shell bought back $8.5 billion of shares in the first half of 2022, and the new buyback program is significantly higher than forecasts.
“The strong oil price backdrop helped Shell deliver a hit set of results. The dividend may have stayed the same, but the share buyback program is positive news for shareholders,” said Stewart Lamont, investment manager at Brewin Dolphin.
Shell shares rose 0.9% in open London trading.
French rival TotalEnergies ( TTEF.PA ) also reported on Thursday a record profit of $9.8 billion in the quarter and accelerated its buyback program. Read more
Norway’s Equinor ( EQNR.OL ) raised its special dividend and stepped up share buybacks on Wednesday. Read more
US rivals Exxon Mobil and Chevron report results on Friday.
Oil and gas prices remained high during the quarter, with benchmark Brent crude averaging around $114 a barrel. Benchmark European natural gas prices and global liquefied natural gas (LNG) prices averaged all-time highs during the quarter.
BOOST REFINING
Shell’s second-quarter adjusted earnings rose to $11.47 billion, beating the $11 billion forecast by analysts in a company poll.
That’s up from $5.5 billion a year earlier and from $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 partially offset by lower LNG trading results.
Refining profit margins tripled in the quarter to $28 a barrel. They have weakened significantly in recent weeks amid signs of easing gasoline demand in the United States and Asia.
Shell said utilization of its refineries would increase to 90-98% in the third quarter, compared with 84% in the second quarter.
Oil and gas production in the second quarter fell 2% from the previous quarter to 2.9 million barrels of oil equivalent per day (boepd).
Shell’s LNG liquefaction volumes were 7.66 million tonnes in the second quarter, down from 8 million in the previous quarter. Volumes are expected to decline to between 6.9-7.5 million in the third quarter due to strikes at its Australian Prelude site and scheduled maintenance.
Shell used the surge in cash generation to further reduce its debt, which stood at $46.4 billion at the end of June, down from $48.5 billion three months earlier. The ratio of debt to capitalization, or gearing, fell to 19.3%.
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Reporting by Ron Busso and Shadia Nasrallah Editing by Jason Neely and Mark Potter
Our standards: The Thomson Reuters Trust Principles.
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