Shell and Total Energies reported sharp falls in second-quarter profit

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  • Shell profits cut by half due to plunging energy prices, Q2 profits slump 56% at Shell, 49% at Total Energies  
  • Oil, gas, and LNG prices much lower in 2023 vs 2022 
  • Total Energies sees LNG prices recover somewhat in winter 
  • Shell slows the pace of the share buyback program.

Shell and Total Energies reported sharp falls in second-quarter profit from bumper 2022 earnings as oil and gas prices, refining margins, and trading results all weakened. Oil and gas prices soared last year in the wake of Russia’s invasion of Ukraine but energy prices have dropped sharply this year as fears of shortages eased amid global economic challenges.

Both companies missed earnings forecasts on Thursday, recording headline profit for April-June of around $5 billion each, down 56% year-on-year at Shell and 49% at Total Energies. Still, this was broadly in line with Shell’s performance in 2021, while Total Energies outperformed its pre-invasion results.

Shell’s shares were down 1.9% at 0755 GMT and Total Energies’ slipped 0.4%, compared with a 1% decline in the European index of oil and gas companies (.SXEP).

Shell slowed the pace of its share buyback program to $3 billion in the next three months and $2.5 billion thereafter, while Total Energies stuck to a flagged $2 billion for the third quarter. Shell also raised its dividend by 15% quarter-on-quarter, as expected.

Shell’s Chief Executive Wael Sawan said the company showed “strong operational performance despite a lower commodity price environment”, while Total Energies’ Chief Patrick Pouyanne said the quarter showed a “softening oil and gas environment.”

Norway’s Equinor reported on Wednesday a 57% drop in second-quarter profits from a year earlier.

Benchmark Brent crude prices averaged $80 a barrel in the second quarter of 2023, compared with $110 a year earlier. Prices for liquefied natural gas (LNG), a key product for both groups, dropped to $11.75 per million British thermal units (mmBtu) from around $33.

Natural gas costs are more country-specific but hit unprecedented levels when supplies from Russia were cut off. Contracts for the year-end have the price at 133p per therm currently – down from highs last summer above 700p.

The downward shift in wholesale prices is being reflected in lower energy bills for households though the energy price cap is currently £1000 above its pre-pandemic average. It is mostly due to the gas element which remains elevated on typical levels by more than half.

Shell is an international energy company with expertise in the exploration, production, refining, and marketing of oil and natural gas, and the manufacturing and marketing of chemicals. They use advanced technologies and take an innovative approach to help build a sustainable energy future. It invests in power, including from renewable sources such as wind and solar. It also invests in electric vehicle charging and low-carbon fuels for transport, such as advanced biofuels and hydrogen.

  (With inputs from agencies)

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