British oil giant Shell announced a profit of $6.2 billion for the third quarter, aligning closely with analysts’ estimates, as the company reaped the benefits of higher oil prices and improved refining margins. Although slightly below the consensus expectation of $6.48 billion, this marked a significant increase from the $5.1 billion profit in the second quarter.
However, the Q3 profit represented a notable decline compared to the $9.45 billion reported for the same period the previous year when oil and gas prices were bolstered by the Russia-Ukraine conflict.
In response to its strong financial performance, Shell also unveiled a $3.5 billion share buyback program, set to be executed over the next three months. This follows the initial announcement of a $5 billion buyback in June, and according to Shell CEO Wael Sawan, the new plan significantly surpasses that initial figure. Sawan stated, “Shell delivered another quarter of strong operational and financial performance, capturing opportunities in volatile commodity markets.”
While Shell reported robust financials, its free cash flow fell from $12.1 billion in the second quarter to $7.5 billion in the third quarter. Cash capital expenditure increased from $5.1 billion to $5.6 billion, reflecting the dynamics of the energy sector.
Oil prices surged during the third quarter of 2023 due to various factors, including supply cuts by major oil-producing countries like Saudi Arabia and Russia. The International Energy Agency also pointed out that oil markets remain volatile, mainly due to the escalating conflict in the Middle East.
The announcement from Shell follows a recent trend among energy majors, with the sector enjoying record profits, driven by surging fossil fuel prices. However, these financial reports have come under scrutiny amid growing concerns about the pace of decarbonization efforts, including from some of the company’s shareholders.
Shell acknowledged last week that it plans to cut 200 positions within its low-carbon solutions unit in 2024, raising questions about the company’s commitment to achieving net-zero emissions. Stuart Lamont, an investment manager at RBC Brewin Dolphin, commented, “Another share buyback should be good news for shareholders, but there is little said about its plans to achieve net zero in today’s update – this remains a longer-term concern for many, after the company announced its decision to focus on oil and gas production earlier this year.”
Despite these concerns, the geopolitical landscape’s ongoing volatility and the continued rise in oil prices are expected to contribute to a strong final quarter for Shell. The company’s London-listed shares were up by 1.1% at 8:30 a.m. on Thursday, reflecting positive investor sentiment.