Shell hiked its quarterly share buyback to $5 billion after earnings doubled and cash flow soared, driven by elevated oil and gas prices caused by the Middle East conflict and exceptional refining margins amid a historic fuel squeeze.
The British energy major's adjusted earnings--a closely watched metric that strips out certain commodity price adjustments and one-time charges--nearly doubled to $10.81 billion from the $5.43 billion it reported in the same period last year. Analysts had expected $10.33 billion, according to estimates compiled by Vara Research.
In July, Shell announced a $3 billion buyback after scaling back repurchases from $3.5 billion earlier in the year.
Conflict in the Middle East has kept oil prices above $100 a barrel and gas prices high. This is despite a combination of workarounds--such as pipelines and ship-to-ship transfers-- enabling oil flows out of the Strait of Hormuz to return preconflict levels. A geopolitical premium remains embedded in prices, with investors remaining unsure where the conflict is headed.
The U.S. has told several Gulf Arab countries to be prepared for a short, intense military campaign once the U.S. midterm elections are over, The Wall Street Journal reported Wednesday, citing people briefed on the conversations. The prospect of further military action will keep prices high and volatile--conditions that will also benefit Shell's vast trading desks, which continued their strong performance over the quarter.
Shell's refineries--where crude oil is turned into diesel, jet fuel and a myriad of oil products--were the stand-out winners of the third quarter.
Margins jumped to a record level of $42 a barrel, far exceeding the $28.04 a barrel the company inked shortly after Russia's full-scale invasion of Ukraine in 2022 that upended energy markets.
Drone damage to Russian refineries and reduced refining activity across the Middle East have taken roughly 6 million barrels a day of refining output offline, according to oil analyst group Wood Mackenzie. The market was tightened further by Chinese export restrictions.
European gas prices soared over the quarter after the region was forced to replace lost Middle Eastern cargos by outbidding Asian customers. For those with LNG facilities outside of the Gulf, this has offered an earnings windfall. Shell, with LNG operations in Canada, Nigeria and Australia, benefits with earnings in its integrated gas unit jumping to $3.04 billion.
The impact of the conflict on Shell's gas unit has been mixed. One of its crown-jewel assets, the Pearl gas-to-liquids facility in Qatar, was targeted, with production yet to resume.
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