Shell has released its financial results for the second quarter of 2024, beating earnings estimates and announcing a fresh buyback.
The company reported lower income attributable to shareholders compared to the first quarter of 2024, primarily due to reduced LNG trading and optimisation margins, lower refining margins, and decreased margins from crude and oil products trading and optimisation.
However, earnings hit $6.3 billion, surpassing estimates of $5.9 billion.
Shell shares were 1.50% higher at the time of writing.
In terms of shareholder distributions, distributed a total of $6.1 billion to shareholders in the quarter, comprising $4.0 billion in share repurchases and $2.2 billion in cash dividends. Shell has announced a further share buyback programme of $3.5 billion, expected to be completed by the third quarter 2024 results announcement.
The company’s net debt position improved, decreasing to $38.3 billion at the end of the second quarter, down from $40.5 billion at the end of the first quarter. This reduction in debt contributed to a lower gearing ratio of 17.0%, compared to 17.7% in the previous quarter.
Although there may be concerns about mixed income and earnings compared to prior quarters, investors will be encouraged by the fact Shell remains a generating machine with free cash flow increasing to $10.1 billion.
“Shell’s earnings took a dive from the levels seen in the first quarter, but once again beat expectations. Lower margins in trading, refining and oil products compounded a small dip in production due to maintenance at its fields,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“But the lifeblood of the business, free cash flow, actually increased marginally to $10.2bn. That’s given management the confidence to plough another $3.5bn into buybacks, maintaining the quarterly run-rate. It’s also supporting investment into Liquified Natural Gas projects in Abu Dhabi and Trinidad and Tobago, and the Atapu-2 deepwater project in Brazil. Meanwhile, it’s taken another chunk out of net debt which now stands at $38.3bn.”
“Mentions of new investments in new energy were conspicuous by their absence which may disappoint investors looking at Shell’s future beyond fossil fuels. The pause on construction at its proposed biofuels facility in the Netherlands contributed to a $2bn impairment to the value of its assets. However, its carbon capture at the Scotford refinery in Canada may go some way to appease environmentalists. For now, financial returns are front and centre of Wael Sawan’s mind, but that does leave Shell well placed to invest in the transition projects that are financially viable.”