May 6, 2023 [The New York Times] – The oil and gas giant said its earnings, which exceeded analysts’ expectations, were bolstered by strong energy trading.
Shell said it intended to buy $4 billion of its shares in the second quarter.Credit…Sam Bush for The New York Times
Shell, Europe’s largest energy company, said Thursday that its profit jumped 6 percent in the first quarter to $9.6 billion, a sign that the company remains hugely profitable, even with oil prices under pressure.
The company’s earnings, adjusted for items like divestitures, were below the record of $11.5 billion set in the second quarter of 2022, but they still exceeded analysts’ forecasts.
Shell’s European rivals have also reported hefty profits in the first quarter: BP earned $5 billion and TotalEnergies of France had $6.5 billion.
Oil and natural gas prices are below their peaks last year, but they remain relatively robust. Brent crude, the international benchmark, has dropped about 15 percent since April 12 to $73 a barrel, despite the recent announcement by the oil cartel known as OPEC Plus that it would cut output beginning this month.
Major energy companies are able to benefit from the volatile environment by using their energy trading arms to profit from rapid price movements resulting from uncertainties like the war in Ukraine and the shift from fossil fuels to cleaner alternatives.
These units make money by trading across the wide range of fuels that the large companies produce. Both Shell and BP gave credit to their trading arms for their strong performances in the first quarter.
Shell is considered the largest energy trader in Europe. Wael Sawan, the company’s chief executive, told analysts on Thursday that he expected trading to play an even bigger role as the industry shifts to cleaner fuels like hydrogen.
Oswald Clint, an analyst at the research firm Sanford C. Bernstein, said in a note to clients that trading contributed an average of $6.4 billion to the combined quarterly earnings of the three European giants. “Volatility,” he wrote, “plays perfectly into the hands of these companies.”
When it comes to large energy companies, however, investors remain focused on dividends and stock buybacks. BP disappointed on Tuesday when it said it would slow buybacks, causing the stock price to fall more than 8 percent.
But Shell said it would maintain the pace of its program, intending to buy $4 billion in shares in the second quarter. The company said that total distributions to shareholders, including dividends, would be $12 billion for the first half of the year.
Shell’s shares rose nearly 2 percent in trading in London.