Shell reports lowest quarterly profit in more than two years

Shell has booked the lowest quarterly profit in 30 months for Q2 as lower oil prices bite into the bottom line.

Ron Bousso had the news for Reuters:

Royal Dutch Shell’s second-quarter profit slumped to a 30-month low due to weaker gas prices and refining margins, falling far short of expectations and denting a steady recovery in recent years.

Shares of the Anglo-Dutch company fell 4.2% as trading opened in London, compared with a 0.3% decline in London’s FTSE 100 index.

Shell, the world’s second-largest publicly-traded energy company, joins rivals Total and Norway’s Equinor in reporting weak results for the quarter.

Rising debt levels also underscored the strain Shell’s dividend program, the world’s largest at over $15 billion, and a $25 billion share buyback program, are putting on the company.

The BBC noted peer BP had performed much better adding Shell kept its dividend unchanged:

BP, its smaller UK rival, reported quarterly profits that beat expectations earlier in the week, holding steady at about $2.8bn, while France’s Total and Norway’s Equinor said profits fell.

Shell’s shares dropped 3.9% in early London trading.

The company held its dividend for the three-month period at $0.47 per share for a total payout of $3.8bn.

Separately, Shell said it had finished the first round in its plan to buy its own shares, having spent $9.25bn over the past year. It plans to spend $25bn by 2020.

Companies say they use share buybacks to return cash to shareholders, but critics say dividends are a better way to do that and that buybacks are merely a way of flattering a company’s earnings per share.

Robert Perkins from S&P Global Platts focused on the silver lining:

Shell’s second quarter production rose 4% on year but saw sharply weaker earnings for the period on lower oil and gas prices and thinner refining margins, the company said Thursday.

Oil and gas production in the second quarter of 2019 was 3.58 million b/d of oil equivalent, mainly due to field ramp-ups in North America and the transfer of its Salym asset from the Integrated Gas segment.

During the quarter, Shell started up its Appomattox field in the US Gulf of Mexico and saw the first LNG cargo from its Prelude project.

Shell, which does not give production targets, said it expects production to grow by some 50,000 – 100,000 boe/d in the third quarter from year-ago levels.