Shell shares rise following Q3 profit increase despite production decrease
(Bloomberg) – Shell Plc shares rose as the company accelerated the pace of buybacks following an increase in third-quarter profit from the prior period due to higher energy prices, strong gas trading and wider refining margins.
The company’s performance, which matched analyst expectations, caps a mixed earnings season for the oil and gas industry. The U.S. majors fell short of estimates, taking some of the shine off recent takeover deals, while their European peers mostly did better than expected.
“Shell delivered another quarter of strong operational and financial performance,” Chief Executive Officer Wael Sawan said in a statement on Thursday. Total buybacks of $6.5 billion in the second half are “well in excess” of the $5 billion pledged in June, he said.
Shares of the company rose 2.2% to 2,715 pence as of 9:16 a.m. in London.
Shell’s adjusted net income from July to September was $6.22 billion, an increase of 23% from the prior quarter but down about a third from a year earlier, according to the statement. The London-based oil and gas giant said it would repurchase $3.5 billion of shares over the next three months, an increase from $3 billion in the prior period.
That stands in contrast to BP Plc, which kept its buyback steady after profit fell short of expectations. JPMorgan Chase & Co. downgraded the company on Wednesday after questioning whether it can maintain its pace of repurchases in the fourth quarter.
Shell’s results are good overall, with buybacks that are “slightly above market expectations,” RBC analyst Biraj Borkhataria said in a note. Guidance on liquefied natural gas volumes looks “slightly soft in some aspects,” he said.
Gas trading. The company had already highlighted its strong performance in natural gas trading in the third quarter, which offset lower production. Total oil and gas output was down 9% from the preceding three months, reflecting higher levels of planned maintenance at the Prelude LNG facility in Australia and works in Trinidad and Tobago.
Maintenance at Prelude and lower volumes from Egypt will continue to have an impact on LNG output until the end of the year, Shell said.
Shell’s results were also boosted by higher refining margins, with its own global metric almost doubling in the quarter. However, the company said that could change in the final three months of the year. Earlier this week, BP’s Interim CEO Murray Auchincloss said refining margins are “challenging” due to an oversupply of diesel and gasoline globally.
The oil majors’ growth strategies are in the spotlight after Exxon Mobil Corp. and Chevron Corp. agreed a pair of takeovers last month together worth more than $100 billion. The CEOs of BP, TotalEnergies SE and Eni SpA have all rebuffed suggestions that they need to follow the example of their dealmaking American rivals.
Shell’s Sawan may face similar questions when he faces analysts later on Thursday, although he already said at the company’s capital markets day in June that he wasn’t looking for large acquisitions.
In the face of inflation and rising costs in some parts of the industry, Shell held the line on capital spending. It predicted a full-year spend in the range of $23 billion to $25 billion, a tighter spread than three months ago when it was pegged at $23 billion to $26 billion.
