Shares in energy giant Shell (LON:SHEL) gained after the firm’s Q2 earnings more than doubled from last year. As well as a higher oil price, results were helped by higher utilisation rates and refining margins.
Earnings more than double
For Q2, Shell posted adjusted earnings of $9.84 billion against $6.9 billion in Q1 and $4.3 billion a year ago. The result was above the company-compiled consensus of $8.9 billion and just shy of the top estimate of $10 billion.
The beat reflected higher realised prices, higher LNG trading and optimisation, favourable tax movements, higher chemicals margins and higher crude and oil products trading and optimisation. These were partly offset by lower volumes, mainly due to the impact of the Middle East conflict on Qatari output, and lower lubricant margins.
Cash flow from operating activities soared to $21.4 billion compared with $6 billion in Q1 and $11.9 billion last year. Capital spending was flat on Q1 at $4.2 billion and down on the previous year’s $5.8 billion, leading to a 12.4% return.
The group reduced its net debt to $42 billion from $52.6 billion in Q1 and launched a further $3 billion share buyback. This marks the 19th consecutive quarter of share buybacks of $3 billion or more.
After a tricky start to the year, Shell has really hit its stride in Q2. It’s tempting to put the performance down to higher energy prices, but that overlooks improvements at the company level.
As well as continuing to take out costs, Shell is paying down debt and reshaping and optimising its portfolio. The acquisition of Canada’s ARC, a major player in North American shale gas, will complete in Q3 and will add further momentum.
The ARC deal caused the firm to halt its $3 billion Q1 buyback after $1.8 billion had been spent. The remaining $1.2 billion has been added to the latest $3 billion, so buybacks this quarter will total $4.2 billion.
Disclaimer: The author owns shares in Shell
