Shell Beats Second-Quarter Profit Projections, Launches $3.5 Billion Share Buyback Plan

ALBA, FLORIDA — British oil giant Shell on Thursday reported second-quarter earnings that beat expectations, despite challenges such as lower refining margins and a weak performance in its liquefied natural gas business.

Key financial data

Shell reported adjusted earnings of $6.3 billion for the quarter ended June, beating analysts’ projections of $5.9 billion, according to LSEG estimates. However, that represents a 19% decline from the $7.7 billion it reported in the first quarter of 2024.

Share buybacks and dividends

The company also revealed a $3.5 billion share repurchase program that will run over the next three months, maintaining the same pace as the previous quarter. The dividend remains steady at 34 cents per share.

CEO Insights

“We’re in a good position and we have good momentum, in our opinion, but there’s still a lot to do,” Shell CEO Wael Sawan said in an interview with CNBC’s “Squawk Box Europe.” He highlighted the company’s ongoing journey to transform into a more disciplined, value-focused entity, noting that they’re “halfway there” in their 10-quarter plan.

Sawan highlighted significant improvements in costs, capital discipline and operating performance. Shell has achieved $1.7 billion in structural cost reductions since 2022, moving closer to its goal of cutting costs by $2-3 billion by the end of next year.

Market reaction and comparisons

London-listed Shell shares rose 1.4% on Thursday morning, adding to an 11% gain so far this year, outpacing European peers. British rival BP similarly raised its dividend and extended its share buyback program after stronger-than-expected earnings. U.S. oil majors Exxon Mobil and Chevron are set to report second-quarter results on Friday.

Strategic changes

Shell recently announced a planned write-down of up to $2 billion, following the sale of its Singapore refinery and the halt in construction at its Rotterdam facility. This move is in line with Sawan’s strategy to minimize environmental impact and focus on more profitable ventures. The sale of the Singapore assets to a joint venture between PT Chandra Asri and Glencore is expected to close by the end of the year.

John Moore, senior investment manager at RBC Brewin Dolphin, described Shell’s second-quarter performance as “strong,” reinforcing market optimism about the company’s future. Moore noted that “Shell has been more vocal in its commitment to oil and gas for the foreseeable future, and this should support the company’s earnings in the medium term.”

Concerns about the energy transition

However, the perennial question of Shell’s path to net zero emissions remains. Some shareholders have raised concerns about the company’s energy transition strategy, particularly after it revised its 2030 carbon reduction target and abandoned its 2035 target due to “uncertainty about the pace of change in the energy transition.”

Affirming Shell’s commitment to its 2050 net zero emissions target, Sawan said: “We are absolutely committed to the 2050 target, but we also recognize that the trajectory from here to there is not linear.” He stressed that there will be “significant twists and turns” and that the company is “exercising strategic patience” to focus on opportunities that create value now and in the future.