Shell, the British Oil Giant, reported a robust $6 billion third quarter profit on Thursday. This was well above analyst expectations and Shell also announced a $3.5 billion buyback of shares.
Gas sales were the main driver of company performance, even though crude oil prices fell and margins for refining decreased.
Shell’s profit for the quarter exceeded expectations by $5.3 billion. This shows Shell’s resilience in a market that is volatile.
Sinead Gorman, Shell’s CFO, said in a press release that Shell has consistently demonstrated its financial strength. She called it “the 12th consecutive quarter of substantial share buybacks”.
She also added:
We delivered strong results this quarter despite an unfavorable macro-environment, thanks to solid performance in our entire portfolio.
Shell’s strategy is to increase cash flow and discipline its spending.
Shell’s free cash flow for the third quarter climbed from $7.5 billion to $10.83, an impressive increase compared with last year. This indicates a high level of operational efficiency.
Capital expenditures were reduced from $5.65 to $4.95 Billion, a year-on-year decrease, due to cost cutting initiatives.
The net debt fell to $35.2 billion from $40.5 billion the year before.
Shell share price rises
Shell shares rose 0.8% at the opening of trading in response to this news.
Maurizio Caulli is an energy analyst with Quilter Cheviot. He told CNBC that Shell’s performance was better than expected at almost every level. Shell’s portfolio rationalization approach and its operational improvements were credited.
Carulli brought up Shell’s position as a leader in the liquified gas market (LNG), which, he said was “a strong position” on an energy market that is evolving. LNG growth projections for the next decade make this stance even more impressive.
Shell’s impressive quarterly results are a result of the global oil price decline, which has fallen approximately 17% during the third quarter due to concerns about demand.
BP’s rival, on the other hand, has reported its lowest earnings quarterly in 4 years. The reason given was reduced refining profits. BP reported a replacement cost profit of $2.3 billion for the third quarter, a sharp decline compared with last year.
Environmental groups criticise the government
Shell was again criticized by environmental activist group Follow This despite its recent financial success.
Shell’s investments in clean energy fell by 8% from the total capital spending in the second to the third quarter.
Shell’s Climate Strategy is still a source of concern.
Shell has a long-standing commitment to achieving net zero emissions by the year 2050. However, earlier this summer, Shell revised its carbon reduction targets for 2030, choosing a more conservative approach.
Gorman responded by highlighting recent initiatives such as the completion and implementation of the Northern Lights project for CO2 storage in Norway.
Shell is also expanding its footprint to be low carbon in the US. It has acquired a Rhode Island power plant for growing demand in electrification.
This investment is part of a larger plan by the company to invest $10-15 billion in low-carbon projects from 2023-2025. Projects range from charging infrastructure for electric vehicles to carbon storage.
Shell’s continued strong financial performance is reflected in the fact that it continues to focus both on its oil profits as well as the gradual investments into clean energy. This reflects the goal of balancing profitability with sustainability.
As the energy industry evolves, the company’s capability to manage these pressures is likely to be crucial.
The post Shell Q3 earnings announced: British oil company posts $6B profits, $3.5B in share buybacks may be updated as new developments unfold.
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