Shell increases buybacks as quarterly profit drops to $6.2bn

London — Oil and gas giant Shell on Thursday reported a 34% annual drop in third-quarter profit to $6.2bn as energy prices cooled, with strong trading of liquefied natural gas (LNG) helping offset a sharp drop in its production.

The company also announced share buybacks of $3.5bn over the next three months, up from $2.7bn in the previous three months, and maintained its dividend unchanged at $0.331 per share.

Shell’s results wrap up third-quarter earnings for the West’s top energy companies, which have seen profits drop sharply from last year as oil and gas prices eased after rallying in the wake of Russia’s invasion of Ukraine.

Contrasting with rival BP, the gas trading results of which weighed on quarterly profits, Shell said its earnings were supported by “favourable” LNG trading results, which were higher than in the second quarter.

Its earnings were, however, again hit by lower output at its flagship LNG division, which has been plagued by operational problems in recent years, particularly at its 3.6-million tonne per year Prelude floating LNG production facility off the coast of Australia.

Production at the Integrated Gas division was down 9% from the previous quarter due to maintenance at Prelude — which was also cited as behind a 4% drop in liquefaction volumes — as well as sites in Trinidad and Tobago and in Qatar, it said.

Shell expects Prelude to ramp back up in December after starting maintenance work in August, a company spokesperson said on Thursday.

Production in the Upstream division was however up 3% from the previous quarter to 1.75-million barrels of oil equivalent per day.

“Shell delivered another quarter of strong operational and financial performance,” CEO Wael Sawan said in a statement.

“We continue to simplify our portfolio while delivering more value with less emissions.”

Shell shares were up 1.4% at 0829 GMT, outperforming a broader index of European energy firms rising 0.8%.

Shell reported adjusted earnings of $6.22bn, broadly in line with company analysts’ forecast of $6.25bn. That compared with quarterly earning of $9.45bn a year earlier and $5bn in the second quarter of 2023.

The group tightened the upper range of its 2023 capital spending target to $23bn-$25bn from $23bn-$26bn previously.

“Results look broadly in line, but the higher buyback and a lower capex range (is) likely to be taken as a small positive,” Redburn analyst Stuart Joyner said.

Sawan, who took the helm in January, vowed to revamp Shell’s strategy to focus on higher-margin projects, steady oil output and grow natural gas production.

As part of the strategy, Shell announced plans to cut at least 15% of the workforce at its low-carbon solutions division and scale back its hydrogen business.

Shell said that most of its Renewables and Energy Solutions activities were loss-making in the third quarter.

Reuters