Shell Begins New Share Buyback as Earnings Beat Estimates

Shell (NYSE: SHEL) is launching yet another $3.5 billion share buyback program after booking better-than-expected earnings for the second quarter of the year.

The UK-based supermajor reported on Thursday adjusted earnings of $6.3 billion, down from $7.7 billion for the first quarter of the year, on the back of lower prices and volumes and lower trading results due to seasonality and reduced volatility.

The second-quarter result, however, easily beat the market expectation of earnings of $6 billion.

Lower refining margins, driven by a stabilizing market with increased supply, led to lower earnings in the chemicals and products division, on top of lower trading results due to reduced volatility, Shell said.

Alongside the quarterly results, the supermajor said it was launching a $3.5 billion share buyback program, expected to be completed by the Q3 2024 results announcement. Over the last four quarters, total shareholder distributions paid were 43% of cash flow from operations (CFFO), Shell noted.

Commenting on the further share repurchases, CEO Wael Sawan said in the quarterly results presentation,

“This makes it the 11th consecutive quarter in which we have announced 3 billion dollars or more in buybacks showing that the strong performance of the business results in compelling returns to our shareholders.”

Shell has also made $1.7 billion of structural cost reductions since 2022, as Sawan aims to simplify the structure and allocate cash to the projects with top returns.

In the summer of 2023, Shell unveiled its new strategy to continue investing in oil and gas production and selectively pour capital into renewable energy solutions, angering climate activists and some institutional investors.

Shell’s Sawan has said that reducing global oil and gas production would be “dangerous and irresponsible” as the world still desperately needs those hydrocarbons.  

Shell’s Q2 earnings above estimates and a new buyback follow the announcement from the other UK-based supermajor, BP, earlier this week that it is boosting its dividend by 10% and extending its buyback program as it booked better-than-expected earnings for the second quarter.

By Tsvetana Paraskova for Oilprice.com

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