Shell maintains share buybacks, cuts debt as profit beats estimates

William Mathis
| Bloomberg

Shell Plc reported second-quarter profit that beat estimates and confirmed a $3.5 billion share buyback.

According to a statement from the company on Thursday, in addition to the steady pace of shareholder returns, the company made progress in strengthening its balance sheet, with net debt reduced by more than $2 billion during the quarter.

Shell is the latest European company to report results, and like its peers, its profits have been helped by oil prices, which averaged about $85 a barrel in the second quarter. Those strong mining profits helped offset weakness in other areas, notably refining and natural gas trading.

These results underscore how important their core oil business remains to these companies, despite efforts in recent years to develop diversification and decarbonization strategies.

Shares in the company were up 1.3% at 2,877 pence at 8:04 a.m. in London.

Shell is focused on “making sure we can consistently reward our shareholders while continuing to modestly deleverage and invest in our businesses,” Chief Executive Wael Sawan told Bloomberg TV. “We’re building a business that is actually resilient to low oil prices,” and its balance sheet is so strong that share buybacks could continue even if oil prices fell to $50 a barrel, he said.

Adjusted net income for the period was $6.29 billion, compared with $5.07 billion a year earlier and beating analysts’ average forecast of $5.98 billion. Cash flow from operating activities was $13.51 billion in the quarter, beating expectations and the highest in a year.

“The main driver of this development was the upstream market, while better-than-expected results were also recorded in marketing,” RBC analyst Biraj Borkhataria said in a note.

Total adjusted profit for Shell’s integrated gas business fell 27% from the previous quarter, while the mining business rose 21%. Sales of chemicals and products fell by about a third.