Shell has announced record profits for a second consecutive quarter and a $6bn share buyback scheme as the fallout from the war in Ukraine generates bumper earnings for the world’s oil and gas majors.
Europe’s largest oil company posted adjusted earnings — the profit measure most closely tracked by analysts — of $11.5bn in the second three months of the year, breaking the record $9.1bn posted in the first quarter.
That beat average analyst estimates of $11bn and was more than double the $5.5bn it recorded a year ago.
Shell produced less oil than in the first quarter but benefited from higher prices, reflecting the soaring cost of crude in April, May and June following Russia’s invasion of Ukraine in February.
Higher refining margins drove performance in its chemicals and products business, while it also noted “exceptionally strong” earnings from its gas and power trading business.
That was partly offset by a slightly weaker performance in its giant integrated gas division. Integrated gas earnings fell about 8 per cent from the first quarter because of lower trading profits and a drop in volumes of liquefied natural gas following its decision to cease participation in 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 huge challenges,” said chief executive Ben van Beurden.
Shell left its dividend at $0.25 a share but said that, with the $6bn share buyback plan, total distributions to shareholders would be “significantly in excess” of 30 per cent of cash flow from operations.
The new round of share buybacks follows $8.5bn of buybacks that were completed in the first half of the year.
The dividend is still a long way below its pre-Covid level of $0.47 a share. In 2020, Shell slashed the dividend by two-thirds to $0.16, the first reduction since the second world war, as lockdowns hit demand and pushed oil prices below $20 a barrel.
Biraj Borkhataria, analyst at RBC Capital Markets, said the lack of a dividend increase was made up for by the “much higher” buyback resulting overall in “higher distributions than expected”.
“On a flat dividend, it’s plausible that Shell could return close to $30bn to shareholders this year, or more than 15 per cent of its market cap,” he said.
Cash flow from operations, excluding working capital movements, hit $23bn in the first half of 2022, higher than average analyst forecasts of $19.2bn. Net debt fell to $46.4bn from $48.5bn three months earlier.