Shell Posts Near-Record $9.8 Billion Profit, Maintains $3 Billion Quarterly Buyback
Key Takeaways
- •Shell's net profit reached $9.8 billion in the April-to-July quarter, more than double the same period a year earlier and ahead of expectations.
- •The company plans to continue its $3 billion quarterly share buyback program despite ongoing market volatility.
- •Shell's integrated gas production declined 30 percent year-over-year, partly due to production halts at its Pearl gas-to-liquids facility in Qatar following military strikes.
- •Brent crude prices spiked to as high as $126 per barrel in late April after Iran effectively closed the Strait of Hormuz, which normally carries about one-fifth of global oil consumption.
- •Oil market tensions have resurfaced as Brent settled above $90 following the collapse of peace negotiations between the United States and Iran.
Shell has committed to continuing its $3 billion quarterly share buyback program after reporting a near-record net profit of $9.8 billion for the April-to-July period, more than double the figure from the same quarter a year earlier and ahead of analyst expectations.
Shares rose approximately two percent to 3,376.00p in early trading following the announcement.
The Anglo-Dutch energy major's profit surge was driven in large part by the impact of the Iran war on oil prices and trading volumes. Brent crude, the international oil benchmark, reached highs of $126 at the end of April after disruption to market flows through the Strait of Hormuz. The narrow waterway, which connects the Persian Gulf and the Gulf of Oman and normally carries roughly one-fifth of global oil consumption, was effectively closed by Iran after war broke out at the end of February.
Shell CEO Wael Sawan said there was "severe disruption in global energy markets" following the war.
Shell's Gas Production Takes a Hit
The conflict also had negative consequences for Shell's operations. The company reported a 30 percent year-over-year decline in production from its integrated gas division.
Shell's Pearl gas-to-liquids facility in Qatar, one of the world's largest plants of its kind, halted production in March after being hit during military strikes. Liquefied natural gas facilities in Qatar that are partly owned by Shell were also affected. The Pearl site has been unable to produce gas since the missile attack.
Oil Market Tensions Resurface
Oil market tensions have returned to levels not seen since early June over the past week, after both the United States and Iran cautioned that expectations of a return to peace negotiations were premature. The price of Brent crude briefly broke above $100 before settling above the $90 mark following the breakdown of peace talks.
"Volatility is the new normal," Sawan told CNBC on Thursday. "What we have been trying to build is a company that is able to thrive through volatility… the macro is such that the commodity prices are high and that provides a very strong tailwind for our results."
Source: OilPrice.com (Reporting by City AM)