Shell makes profits that exceed expectations due to higher gas sales

Shell’s profits exceeded market expectations in the third quarter, despite strong demand for liquefied natural gas.

Europe’s largest oil company reported adjusted profits of $6 billion for the three months ended September, compared with average analyst forecasts of $5.4 billion.

However, this was still 4 percent lower than the previous quarter’s $6.3 billion and approximately $200 million lower than the same period last year.

The FTSE 100 company’s profits are under pressure this year due to subdued oil prices and refining margins as OPEC+ countries boost production, a slowing Chinese economy and easing tensions in the Middle East.

Profits in the chemicals and products business fell 57 percent to $463 million between April and June and by $1 billion in the third quarter of 2023, while the renewable energy business more than tripled its losses year-on-year to 162 million dollars.

Still, the London-based LNG group achieved higher liquefaction volumes, mainly due to increased feed gas supplies in Nigeria and Trinidad and Tobago.

This increased total income by 22 percent, from more than $3.5 billion in the second quarter to $4.3 billion in the following three months.

It has also reduced net debt by more than $3 billion to $35.2 billion, reaching a gearing ratio of 15.7 percent, despite spending $2.2 billion on dividends and $3.5 billion on stock buybacks.

Shell has announced a further $3.5 billion share buyback over the next three months and maintained its dividend at 34 cents per share.

The group’s trading update comes two days after BP revealed it beat expectations for the third quarter and posted an underlying replacement profit of £1.75 billion.

However, this was BP’s lowest quarterly profit since 2020, when tough Covid-related travel restrictions hit oil demand.

Under CEO Murray Auchincloss, the company is prioritizing fossil fuel production and cutting back on its investments in renewables amid increased pressure from shareholders to boost returns.

It has suspended all new offshore wind projects and signed a Memorandum of Understanding with the Iraqi government to develop the Kirkuk oil field.

Mark Crouch, market analyst at eToro, believes BP’s recent performance “has more to do with the slack direction the company is taking.”

‘It is Shell’s commitment to hydrocarbons that sets the oil giant apart from its rival. And despite the criticism, these revenues seem to justify Shell’s tenacity.’

In March, Shell scrapped a target to reduce the net carbon intensity of its energy products by 45 percent by 2035, blaming “uncertainty in the pace of change in the energy transition.”

Spending on renewable energy totaled $409 million in the third quarter, representing just 8 percent of total capital expenditures.

Shell shares were 1 per cent higher at 2,514.5p on Thursday morning, although they are down around 12 per cent in the past six months.