Shell beats Q2 estimates, refocuses on oil and gas on strong upstream performance
(Bloomberg) – Shell Plc reported second-quarter earnings that beat estimates and confirmed another $3.5 billion of share buybacks.
Alongside the steady pace of shareholder returns, the company made more progress in strengthening its balance sheet, with net debt dropping by more than $2 billion over the quarter, according to a company statement on Thursday.
Shell is the last of the European majors to report their results and, like its peers, the company’s profits were underpinned by crude prices that averaged about $85 a barrel during the second quarter. These strong upstream earnings helped to offset weakness elsewhere, notably in refining and natural gas trading.
The performance underlines how crucial the core oil and gas business remains for these firms, despite efforts in recent years to develop strategies to diversify and decarbonize.
Shares of the company rose 1.3% to 2,877 pence as of 8:04 a.m. in London.
Shell’s focus is “to make sure that we are able to reward our shareholders consistently, while continuing to modestly de-leverage and invest in our businesses,” Chief Executive Officer Wael Sawan said in an interview with Bloomberg TV.
“We are building a company that is actually resilient to the low side of oil prices” and the balance sheet is so strong that buybacks could continue even if crude fell to $50 a barrel, he said.
Adjusted net income for the period was $6.29 billion, up from $5.07 billion a year earlier and beating the average analyst estimate of $5.98 billion. Cash flow from operations was $13.51 billion in the quarter, ahead of expectations and the highest in a year.
“The key driver of the beat was the upstream, with stronger than expected results in marketing also,” RBC analysts Biraj Borkhataria said in a note.
Overall adjusted earnings from Shell’s integrated gas unit fell 27% compared with the previous quarter, while its upstream business rose 21%. Chemicals and products were down by about a third.
