Oil giant Shell posts $6 billion profit beat, launches new share buyback program

Key Points

• British oil giant Shell reported adjusted earnings of $6 billion for the July-September period, beating analyst expectations of $5.3 billion, according to estimates compiled by LSEG.
• The energy company said it will buy back a further $3.5 billion of its shares over the next three months, while its dividend remained unchanged at 34 cents per share.
• "This quarter we have delivered another strong set of results despite a less favorable macro environment," Sinead Gorman, chief financial officer at Shell, said in a video presentation.

British oil giant Shell on Thursday posted a small year-on-year drop in third-quarter profit as a sharp decline in crude prices and lower refining margins were partially offset by higher gas sales.

The energy company reported adjusted earnings of $6 billion for the July-September period, beating analyst expectations of $5.3 billion, according to estimates compiled by LSEG.

Shell posted adjusted earnings of $6.3 billion in the second quarter and $6.2 billion in the third quarter of 2023.

Shell said it will buy back a further $3.5 billion of its shares over the next three months, while holding its dividend unchanged at 34 cents per share.

It marks the 12th consecutive quarter that Shell has announced at least $3 billion in buybacks, Sinead Gorman, chief financial officer at Shell, said in a video presentation.

"This quarter we have delivered another strong set of results despite a less favorable macro environment," Gorman said.

"This was driven by solid operational performance across our portfolio, continuing the momentum we've built over recent quarters," she added.

Net debt came in at $35.2 billion at the end of the third quarter, down from $40.5 billion when compared to the same period last year.

Shares of the London-listed firm closed 2.3% lower.

'A strong position'

Shell said third-quarter free cash flow rose to $10.83 billion, up from $7.5 billion in the same period a year earlier.

Cash capital expenditure, meanwhile, came in at $4.95 billion, down from $5.65 billion in the third quarter of 2023.

Maurizio Carulli, energy analyst at wealth manager Quilter Cheviot, said Shell's third-quarter results were "much better than expectations at virtually every level" and show that the company "is continuing to deliver on its strategy of portfolio rationalisation, cost reductions and operational improvements."

"Additionally, Shell is number one globally in liquified natural gas (LNG), a business it created from scratch since the seventies, with great foresight," Carulli said, noting that LNG is the only segment of the oil and gas industry expected to grow substantially over the following decade.

"As such, the business has put itself in a strong position to weather any volatility in commodity prices and take advantage of competitor struggles," he added.

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Earlier this week, British rival BP posted its weakest quarterly earnings in nearly four years, weighed down by lower refining margins.

BP reported underlying replacement cost profit, used as a proxy for net profit, of $2.3 billion for the third quarter. That beat analyst expectations — but reflected a steep drop when compared to the same period a year earlier.

Oil prices tumbled over 17% in the third quarter amid concerns over the outlook for global oil demand.

Clean energy investments

Shell faced criticism on Thursday from activist shareholder group Follow This, which highlighted that the oil major's third-quarter earnings show investments in the renewables and energy solutions division fell to 8% of the firm's overall capital expenditure — down from 9% in the second quarter.

The decrease in clean energy investments comes after Shell weakened its 2030 carbon emissions reduction target in March.

Shell said in an energy transition strategy update at the time that it would water down its near-term carbon emissions cuts, while maintaining its pledge to become a net-zero company by the middle of the century.

"By continuing to bet on fossil fuel expansion, the board of Shell jeopardizes the future of the company," Mark van Baal, founder of Follow This, said in a statement.

"Fossil fuel growth delays the transition and increases the risk of a carbon lock-in, which will make it harder to pivot to renewables each year," he added.

Shell on Thursday said that the company underwent some "important developments" in its renewables and energy solutions businesses in recent months.

"One example is in Norway, where our Northern Lights joint venture has now completed construction. The project is ready to begin permanently storing CO2 to help European industries decarbonize," Gorman said.

"Last week, we announced the acquisition of a combined cycle power plant in Rhode Island, where demand is expected to increase due to growing decarbonization efforts linked to electrification," she added.

Shell has previously said it intends to decarbonize profitably and plans to invest $10 billion to $15 billion in low-carbon energy solutions between 2023 and the end of next year.