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SUNRISE, FL — The British oil giant Shell reported second-quarter profits that exceeded expectations on Thursday, despite facing challenges such as lower refining margins and weak performance in liquefied natural gas trading.
Financial Highlights
Shell announced adjusted earnings of $6.3 billion for the quarter ending in June, surpassing analysts’ projections of $5.9 billion, as per LSEG estimates. However, this represents a 19% decline from the $7.7 billion recorded in the first quarter of 2024.
Share Buyback and Dividends
The company also revealed a $3.5 billion share buyback program set to unfold over the next three months, maintaining the same pace as the previous quarter. The dividend remains steady at 34 cents per share.
CEO’s Insights
“We are in a good position and we have good momentum, in our view, but there is still a lot to do,” said Shell CEO Wael Sawan during an interview with CNBC’s “Squawk Box Europe.” He highlighted the company’s ongoing journey towards becoming a more disciplined, value-focused entity, noting they are “halfway there” in their 10-quarter plan.
Sawan pointed to significant improvements in costs, capital discipline, and operational performance. Since 2022, Shell has achieved $1.7 billion in structural cost reductions, moving towards its goal of cutting costs by $2 billion to $3 billion by the end of next year.
Market Reaction and Comparisons
Shell’s shares, listed in London, rose 1.4% on Thursday morning, contributing to an 11% increase so far this year, outperforming its European counterparts. In a similar vein, British competitor BP raised its dividend and extended its share buyback program following stronger-than-expected earnings. U.S. oil majors Exxon Mobil and Chevron are set to report their second-quarter results on Friday.
Strategic Shifts
Recently, Shell announced an expected writedown of up to $2 billion, following the sale of its Singapore refinery and halting of construction at its Rotterdam facility. This move aligns with Sawan’s strategy to minimize environmental impact and concentrate on more profitable ventures. The sale of the Singapore assets to a joint venture between PT Chandra Asri and Glencore is anticipated to conclude by year-end.
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, “Shell has been more explicit in its commitment to oil and gas for the foreseeable future, and this should support the company’s profits in the medium term.”
Energy Transition Concerns
Despite this, the perennial question of Shell’s path to net-zero emissions remains. Some shareholders have voiced concerns over the company’s energy transition strategy, particularly after it revised its 2030 carbon reduction target and abandoned the 2035 target due to “uncertainty in the pace of change in the energy transition.”
Affirming Shell’s commitment to its 2050 net-zero goal, 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 emphasized 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.
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