Shell reported its lowest quarterly profit in almost two years after oil and gas prices and refining margins all fell in a sign that the run of bumper earnings sparked by Russia’s invasion of Ukraine was drawing to a close.
The UK headquartered group, which is Europe’s largest oil and gas company, made adjusted earnings of $5.1bn in the second quarter, missing analyst estimates of $5.6bn.
Although broadly in line with the $5.5bn Shell reported in the same period in 2021, it was less than half the record $11.5bn it made in the second quarter of 2022 at the height of the energy crisis.
Shell is the first of the so-called supermajors to report its half-year results, with Exxon expected on Friday and BP next week.
The biggest decline came in Shell’s giant integrated gas business where earnings almost halved to $2.5bn from $4.9bn in the first quarter of the year. Lower prices and weaker trading profits owing to “seasonality and fewer optimisation opportunities”, had weighed on performance after a strong first quarter, it said.
“Disappointing numbers,” said Biraj Borkhataria, an analyst at RBC Capital Markets, adding that a $468mn loss in the chemicals division because of weak demand had been bigger than expected.
The quarter was the second for the company under chief executive Wael Sawan, who took the top job in January. Sawan, a Shell-lifer and former head of the group’s oil, gas and renewables businesses, has pledged to focus on performance to close a valuation gap between Shell and US rivals, which are valued at higher cash flow multiples on US markets.
Sawan last month laid out a plan for Shell to cut costs, boost shareholder payouts and devote a higher proportion of spending to oil and gas.
On Thursday, Shell reduced its capital spending plans for 2023 to $23bn-$26bn, down from previous guidance of $23bn-$27bn.
It also increased its quarterly dividend by 15 per cent to $0.33 a share, as previously announced, and committed to buyback $3bn in shares in by the end of October.
Like most of its rivals, Shell has used record profits from the past 18 months to embark on a massive share repurchasing scheme. Last year, it distributed $26bn to shareholders including $18bn in share buybacks, representing almost 10 per cent of its market value.