Shell profits beat forecasts and buybacks continue

A strong performance from Shell’s gas business bolstered its third-quarter profits and paved the way for the energy giant to hand back a further $3.5 billion to stock market investors through a share buyback.
Adjusted earnings at the FTSE 100 energy group slipped by a smaller than feared 3 per cent year-on-year to $6 billion in the three months to the end of September, far surpassing the $5.4 billion anticipated by analysts.
Weakness at its refining operations was offset by higher liquefied natural gas sales, while the impact of softer crude prices on its upstream division was partly countered by lower costs.
The new round of share repurchases, which will be completed by the time of its fourth quarter results, represent the twelfth quarter in a row that Shell has announced stock repurchases of at least $3 billion. It also maintained its quarterly dividend at 34 cents a share. Investors responded by pushing Shell stock up 88p, or 3.5 per cent, to close at £25.78.
Shell is Europe’s biggest oil and gas company and is led by Wael Sawan, a company veteran who became its chief executive at the beginning of last year. Like other big oil companies, it has focused on handing back cash to shareholders in recent years.
Investors sent shares in rival BP down by 5 per cent on Tuesday when it signalled that it would review its target for buybacks next year, fueling speculation that repurchases will be pared back.
Analysts at RBC Capital Markets, a stockbroker, said: “We continue to see Shell’s distribution programme as being more resilient than peers given its fortress balance sheet.”
Sawan said Shell had sought to “build consistency” in its distributions as well as bolstering its financial strength amid an uncertain outlook for the global economy. It continued to cut its borrowings during the third quarter, with its net debt falling to $35.2 billion from $38.3 billion three months earlier and $40.5 billion 12 months’ ago.
This means its balance sheet “is the best we have had since 2015”, Sawan said.
Profits at Shell’s integrated gas business, which includes liquefied natural gas production and trading, climbed to almost $2.9 billion from $2.5 billion last year, while profits at its upstream division oil and gas production division improved to $2.4 billion from $2.2 billion. A black spot was its chemicals and refining business, where profits slumped 68 per cent to $463 million.
Shell contended with weaker crude prices during the quarter, with the Brent international benchmark averaging $80.34 per barrel over the three months, compared with $86.75 a year earlier. Conflict in the Middle East is stoking market volatility and Sawan said: “The one thing I have consistently gotten wrong is a guess on oil prices.
“What we are trying to do is focus on what we can control … and that puts us in the best position to be able to navigate what will be choppy waters.”
Shell’s results came a day after the budget, in which the UK lifted a windfall tax on North Sea oil and gas producers from 35 per cent to 38 per cent. Sinead Gorman, Shell’s finance chief, said there had been “a number of changes in the fiscal policy in the last few years” and that policy “certainty” was wanted.
Like other big international companies quoted in London, Shell’s stock market valuation lags those of its peers on Wall Street, fueling speculation the oil major could move its listing to New York to rectify the situation.
Sawan said in May that “we will always have something like a listing or other elements under review” but that a shift to the US was not being actively considered. He said on Thursday that the issue of its listing “continues not to be a live discussion at Shell” and added: “I’m not going to speculate as to what triggers would change our perspective.”