Shell Starts $3.5-Billion Share Buyback as Q1 Profits Trump Estimates

Helped by higher crude and product trading profits and increased refining margins, Shell (NYSE: SHEL) smashed earnings estimates for the first quarter of the year and announced a new $3.5-billion share buyback as the UK-based supermajor looks to close the stock valuation gap to its U.S. peers.

Shell reported on Thursday adjusted earnings of $7.7 billion for the first quarter, down from $9.6 billion for the same period of 2023. This year’s first-quarter earnings were higher by 6% compared to the fourth quarter of 2023, thanks to higher margins from crude and oil products trading and optimization, and higher refining margins, Shell said.  

The profit smashed the analyst consensus estimate of around $6.5 billion.               

In the upstream segment, Shell’s total oil and gas production was in line with the fourth quarter of 2023 as higher scheduled maintenance was fully offset by improved performance and new oil delivery.

The chemicals and products business boosted earnings due to higher refining margins, driven by higher utilization and global supply disruptions. Petroleum products trading and optimization earnings were significantly higher than in Q4 2023, Shell said.

Adjusted earnings in the integrated gas division fell from Q4, due to lower contributions from trading and optimization, which Shell, the world's top LNG trader, had already flagged last month. Shell said in April that it expects the trading results in its Integrated Gas division to be lower in the first quarter of 2024 compared to an exceptionally strong fourth quarter of 2023.

Much lower natural gas prices this year compared to 2023 dragged down profits at some of the largest oil and gas companies.

U.S. supermajors ExxonMobil and Chevron, as well as France’s TotalEnergies, all cited lower natural gas prices as a key downward pressure on earnings that couldn’t be fully offset by stable crude oil and liquids realizations and refining margins.  

At Shell, the higher crude and product trading and higher refining margins offset the weakness in natural gas and the firm trumped earnings estimates.

“We continue to deliver on our Capital Markets Day targets, giving us the confidence to commence another $3.5 billion buyback programme for the next three months,” CEO Wael Sawan said.

Over the last four quarters, total shareholder distributions paid were 41% of cash flow from operations (CFFO), Shell said.

By Tsvetana Paraskova for Oilprice.com

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