Shell Plc posted a record first-quarter profit and kept up the pace of share buybacks as strong trading performance and higher liquefied natural gas volumes offset lower energy prices.
The company will repurchase $4 billion more of shares, the same amount as in the previous period. That contrasts with British peer BP Plc, which saw its share price drop more than 8 percent earlier this week when it announced a smaller $1.75 billion buyback.
It’s a difference that could help new CEO Wael Sawan reinforce his message that Shell can rise above the competition by reliably delivering generous cash returns to investors.
“Following the BP buyback cut, we got a lot of questions about what Shell would do this quarter given a weaker macro environment,” RBC analyst Biraj Borkhataria said in a note. “What was the fuss about?”
Shell shares rose as much as 3.5 percent before paring gains to 2,354 pence at 11:45 a.m. in London.
The integrated gas business was a key part of Shell’s profit resilience. It posted adjusted earnings of $4.9 billion in the quarter, the second-best performance on record after the prior period. Fuel prices fell from a year earlier as the energy crisis eased in Europe, but the company made up for it with higher volumes and lower operating expenses.
Crucial to this segment are Shell’s gas traders. While the company does not break out the trading’s contribution to earnings, the company said the results were similar to the fourth quarter, when it was the main contributor to the unit’s record profits.
“Trading and, more importantly, optimization in general play a critical role in our current business model for conventional energy,” Sawan said on a call with reporters. “But I think it will play an even bigger role in the future as we look at new energies.”
“Against a backdrop of lower commodity prices in the first quarter, Shell’s broad pace with adjusted earnings of $9.65 billion, 20% ahead of consensus, and roughly in line with fourth-quarter levels, is largely a testament to the strength of its industry. world-leading gas portfolio.” — Will Hares, senior industry analyst at Bloomberg Intelligence
Shell’s adjusted net income was $9.65 billion in the first quarter, up 5.7% from $9.13 billion a year earlier. That was well ahead of even the top estimate of analysts and a record level for the first quarter. Net debt fell to $44.2 billion, down more than $4 billion from a year ago.
Production volumes of liquefied natural gas, which has become a key fuel for Europe after Russia cut gas exports, rose 6% in the quarter with the Prelude installation in Australia back into operation after maintenance, Shell said. Higher production driving earnings has been a theme this season, with Exxon reporting its strongest start to a year after a jump in oil production from new wells.
Shell has scheduled an investor briefing for June, when Sawan, who took over the top job earlier this year, will outline his own strategy. “We expect any adjustments to the overall dividend or distribution framework to be left for the capital markets day,” RBC’s Borkhataria said.
