Shell reported a second-quarter profit of $6.3 billion, marking a 19% decrease from the previous quarter. Despite weaker refining margins and oil and gas trading, the results surpassed analysts’ expectations.
Year-on-Year Improvement
The Q2 profit was nearly 25% higher compared to the same period last year. This improvement signals that CEO Wael Sawan’s strategies to cut costs and enhance performance are taking effect.
Share Buyback and Dividend
Shell announced a $3.5 billion share buyback over the next three months, maintaining the same rate as the previous quarter. The dividend remains unchanged at 34 cents per share.
Market Reaction
We’re seeing the energy system move back towards the pre-2022 normalised level,” Sawan stated. Following the announcement, Shell’s shares rose 1.4% at 0800 GMT, outperforming the broader European energy index, which gained 0.4%.
Industry Context
BP recently raised its dividend by 10% after reporting forecast-beating earnings of $2.8 billion. Last week, TotalEnergies reported a 6% drop in Q2 profits due to weaker refining margins. Exxon Mobil and Chevron are set to report their earnings on Friday.
Strategic Focus
Under Sawan, who took office in January 2023, Shell has scaled back on renewables and hydrogen projects, exited European and Chinese power markets, and sold refineries to focus on higher-margin oil and gas businesses. Shell achieved cost reductions of $700 million in the first half of 2024, bringing total cuts to $1.7 billion since 2022. The company aims to reach a savings target of $2 billion to $3 billion by 2025.
Operational Performance
Analyst Biraj Borkhataria of RBC Capital Markets praised Shell’s “continued strong operational performance.”
Weaker Trading and Earnings Details
Shell’s Q2 adjusted earnings, defined as net profit, exceeded the anticipated $6 billion, rising from $5.1 billion a year earlier. However, this was a decline from the $7.7 billion profit in Q1. The fall was attributed to lower prices, reduced sale volumes, and weaker trading in Shell’s liquefied natural gas (LNG) division due to seasonally lower demand and plant maintenance.
Impairments and Future Outlook
Shell took a $708 million impairment following the sale of its Singapore refinery and a $783 million impairment after pausing the construction of a major European biofuel plant due to weak market conditions. The company expects lower oil, gas, and LNG production in Q3 due to a heavy maintenance schedule.
In summary, Shell’s Q2 profit beat forecasts despite challenges in trading and refining margins, highlighting the effectiveness of cost-cutting measures and strategic focus on higher-margin businesses.
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