Shell: Robust Quarter with Light and Shadow

The British-Dutch energy giant Shell pleases investors with its current quarterly figures, even though the company numbers elicit quite mixed reactions. While the company's shares rise following the announcement of the results, a closer look at the numbers reveals both positive and challenging developments. In the Integrated Gas sector, Shell recorded a slight decrease in total production by 4% to 941 kboe/d, while production in the Upstream sector increased by 2% to 1,811 kboe/d. At the same time, sales volume in the Marketing sector increased by 3% to 2,945 thousand barrels per day. On the other hand, the Chemical & Products segment had to contend with a decrease in refinery utilization by 9% to 1,305 kb/d. Nevertheless, Shell raised its earnings forecast in the Upstream sector for the quarter, even though adjusted quarterly earnings fell by 4% to 6.03 billion USD, and adjusted EBITDA decreased by 5% to 16.01 billion USD. The main reasons cited are lower refinery margins, declining oil prices, and increased operating costs. Despite these challenges, net income for shareholders rose from 3.52 billion USD in the previous quarter to 4.29 billion USD. Notably positive is that the adjusted earnings per ADS were at 1.92 USD, significantly above the consensus of 1.66 USD. Operating cash flow amounted to 14.68 billion USD, and net debt at the end of the second quarter was 35.23 billion USD, with a debt ratio of 15.7%. Shell also announced a dividend of 0.344 USD per share for the third quarter, to be paid on December 19, 2024. Furthermore, the company is initiating a share buyback program totaling 3.5 billion USD, with an expected duration of about three months. Looking ahead, Shell plans to reduce its capital expenditures to below 22 billion USD. For the fourth quarter, Shell anticipates Integrated Gas production between 900 and 960 thousand boe/d and Upstream production around 1,750 to 1,950 thousand boe/d. Additionally, the company expects refinery utilization between 75% and 83% and chemical plant utilization between 72% and 80%. Finally, Shell expects that the adjusted earnings of the corporate center will result in a net expense of about 600 million to 800 million USD.