Shell’s recent quarterly earnings exceeded market predictions, with increased output in its gas division counterbalancing reduced refining margins and lower oil prices.
The energy giant reported adjusted earnings of £4.64 billion, down 3.1% from the previous year’s £4.79 billion. However, this figure surpassed analysts’ expectations of £4.13 billion, and Shell reiterated its commitment to shareholder returns.
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Total production in Shell’s integrated gas division reached 941,000 barrels of oil equivalent per day—lower than the previous quarter but up 4.5% from the same period last year. Liquefaction volumes, the process of converting natural gas into liquid, increased by 9% year-on-year to 7.5 million tonnes. This growth highlights the focus on integrated gas by Shell’s chief executive, Wael Sawan, who, since his appointment in 2023, has implemented cost-cutting measures and reduced emphasis on renewables.
These results come as the Labour Party proposed an increase in the North Sea windfall tax from 35% to 38% and an extension of the levy by an additional year. Shell’s chief financial officer, Sinead Gorman, commented, “Elected officials just have to balance budgets in the best way they see fit,” while stressing the importance of policy stability: “We have to look for policies that provide certainty… we invest over the long term. We have seen a number of changes in the fiscal policy… in the last few years, but we continue to engage constructively with the government on alternative fiscal regimes to support the future of the North Sea and that energy transition in the UK.”
The company also faces a “less favourable” global economic landscape. Brent crude prices have seen a notable decline over the past six months, while weaker global demand for oil has led to tighter margins in Shell’s refinery operations. Gorman acknowledged these challenges, noting that refining remains “a bit more difficult at the moment” as the energy market goes through a period of adjustment.
Shell’s competitors have also been affected; earlier in the week, BP reported a nearly one-third decline in profits due to diminishing refining margins. Shell’s earnings were further impacted by restructuring and redundancy costs, with a 20% reduction in staff across units focused on exploration and development.
Despite these hurdles, Shell announced an additional £2.69 billion in share buybacks, marking the twelfth consecutive quarter of shareholder returns through £2.31 billion in buybacks. The announcement came as climate activists from Fossil Free London gathered outside Shell’s London offices, dressed in Halloween costumes, protesting against the company’s recent relaxation of carbon reduction targets. Like other oil majors, Shell has prioritised financial returns, responding to investor pressure.
Neil Shah, director at Edison Group, remarked that Shell’s results demonstrate resilience across its core sectors: “In contrast to BP’s less favourable performance, Shell’s operational strength in integrated gas and upstream divisions has bolstered earnings, allowing for continued shareholder returns, including a new £2.8bn buyback programme and stable dividends of $0.344 per share.”
He added, “Shell’s robust cash flow from operations, buoyed by a £2.2 billion working capital inflow, has further reduced net debt to £28.5 billion, fortifying the balance sheet.”
