Shell: FTSE 100 giant takes profit beat amid weak oil prices
FTSE 100 juggernaut Shell posted a dramatic hit to earnings in the second quarter amid a volatile period for oil and gas prices.
The London-listed oil major recorded $4.26bn (£3.21bn) marking a 32 per cent fall from the second quarter of 2024, where the firm pocketed $6.29bn.
But Shell managed to scrape past an LSEG-compiled analyst consensus of $3.87bn in analyst earnings. Shares jumped over three per cent as markets opened to 2,727.00.
The oil giant reported a 30 per cent tumble in earnings in its gas division, when compared to the first quarter, on the back of cheaper prices.
European gas prices fell 18 per cent for the second quarter against the first three months of the year.
A ten per cent dip in oil prices also drove a 26 per cent hit in Shell’s Upstream business, which focuses on the exploration and extraction of oils and gas. Earnings at the firm’s chemicals and products division fell sank 74 per cent quarter-on-quarter.
Still, Shell launched a $3.5bn quarterly share buyback, which marks its 15th consecutive quarter of at least $3bn in buybacks.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Shell’s second earnings hit a bit of an oil patch, with lower commodity prices, a weaker trading environment and unplanned downtime at its chemical plants all playing their part.”
Nathan said: “Shell’s balance sheet is one of its key strengths, and investors could start to get nervous if debt continues to rise for any length of time. Nonetheless, management has ploughed on with a further $3.5 billion buyback, the 15th consecutive quarter of stock repurchases of over $3 billion, and there are some signs that financial performance could improve in the third quarter.”
Oil woes
Shell has been stung by the see-sawing of oil prices in the last few months amid an uncertain geopolitical environment.
Prices fell to four-year lows in April with a barrel of Brent crude oil at $59.23 after President Donald Trump slapped sweeping tariffs across the US’ trading partners sparking fears of a global trade war.
But the escalating conflict in the Middle East helped prices spike more than nine per cent to as much as $81 – its most dramatic jump in over three years – as Israel struck Iran’s nuclear bases in June.
Brent crude oil was trading at just over $70 on Thursday morning as markets opened in London.
Shell was the subject of speculation earlier this year regarding a takeover of its struggling domestic rival BP, which has also been hit by the waning oil environment.
But the firm has made clear it had “no intention” of making an offer.
Shell laid out plans in March to double down on its push into liquified natural gas as it re-positioned its strategy to focus on “performance, discipline and simplification”.