Shell Reports Strong Third-Quarter Profits

By Ron Bousso
LONDON (Reuters) – Shell reported third-quarter profits of $6 billion, exceeding forecasts by 12%. Higher liquefied natural gas (LNG) sales compensated for a significant decline in oil refining and trading results.

The results, along with reduced debt and strong cash flow, may enhance investor confidence in CEO Wael Sawan's strategy to improve company performance by 2025, concentrating on profitable sectors, particularly oil, gas, and biofuels.

Shell’s shares rose 3.2% at 1541 GMT.

Market Context

Global refining margins have fallen sharply due to reduced economic activity and new refinery start-ups in Asia and Africa, coupled with a 17% drop in oil prices during the quarter.

Shell, with five refineries, experienced a near 70% annual decrease in profits from refining and chemicals, but this was offset by a 13% increase in profits from its LNG sector, which is the company's largest business.

Barclays analysts noted, “The consistency in performance is impressive.”

Competitors’ Performance

French rival TotalEnergies reported third-quarter profits at a three-year low of $4.1 billion, impacted by declining refining margins and upstream outages, while BP reported a 30% drop in profits to $2.3 billion, the lowest in nearly four years.

Top U.S. producers Exxon Mobil and Chevron are set to report results on Friday.

Financial Highlights

Shell's adjusted earnings of $6.03 billion, defined as net profit, surpassed analysts' expectations of $5.36 billion, although this reflects a 3% decrease from the prior year.

The company announced a $3.5 billion share buyback over the next three months, maintaining its dividend at 34 cents per share. CFO Sinead Gorman stated, “We’ve delivered another strong set of results, showing resilience through the cycle.”

In LNG trading, Shell reported sales of 17 million metric tons, up from 16 million a year earlier. Earnings from oil and gas production rose 9%, with production increasing 3% as new fields came online.

Shell's net debt fell to its lowest level since 2015, currently at $35 billion, with a reduced debt-to-market capitalization ratio from 17.3% to 15.7%. Cash flow from operations increased to $14.7 billion, boosted by capital investments of $2.7 billion. The company anticipates capital spending will be below the $22-$24 billion range set for 2024.

Shell plans to cut costs between $2-3 billion by the end of 2025, recently reducing its focus on renewables and hydrogen, withdrawing from European and Chinese markets, and selling refineries. Furthermore, it has cut its exploration workforce by 20%.