The Hague: Shell plc maintained the pace of share buybacks as it reported another strong quarterly profit despite lower oil and gas prices. The company will repurchase a further $4 billion of shares, the same as in the prior period.
That contrasts with UK peer BP plc, which saw its share price drop more than 8 per cent earlier this week when it announced a smaller buyback of $1.75 billion.
It's a difference that could help new CEO Wael Sawan reinforce his message that Shell can stand above the competition by reliably delivering generous cash returns to investors. "Following BP's cut to the buyback, we received many questions on what Shell would do this quarter given a weaker macro environment," RBC analyst Biraj Borkhataria said in a note. "What was the fuss about?"
The integrated gas business was a key part of the resilience of Shell's profit. It posted adjusted earnings of $4.9 billion in the quarter, the second-best performance on record after the prior period. The price of the fuel was down from a year earlier as the energy crisis ebbed in Europe, but the company offset that with higher volumes and lower operating expenses.
"Against a lower commodity-price backdrop in the first quarter, Shell's wide beat with adjusted earnings at $9.65 billion, 20 per cent ahead of consensus, and roughly in line with fourth-quarter levels, is largely a testament to the strength of its industry-leading global gas portfolio," said Bloomberg Intelligence Senior Industry Analyst Will Hares.
Steep debt cut
Shell's adjusted net income was $9.65 billion in the first quarter, an increase of 5.7 per cent from $9.13 billion a year earlier and well ahead of even the highest analyst estimate. Net debt dropped to $44.2 billion, down more than $4 billion from a year ago.
Production volumes of LNG - which has become a key fuel for Europe after Russia cut gas exports - jumped 6 per cent in the quarter with the Prelude facility in Australia returning to operations after maintenance, Shell said. Greater output driving earnings has been a theme this season with Exxon reporting it strongest-ever start to a year after a jump in oil production from new wells.
Shell has scheduled an investor briefing for June when Sawan, who took over the top job at the beginning of the year, will lay out his own strategy. "We would expect any adjustment to the dividend or overall distribution framework to be left for the capital markets day," said RBC's Borkhataria.