Shell's $3.5 billion share buyback program emerged as a focal point on Thursday, showcasing the company's strategy to enhance shareholder value amidst a challenging market backdrop. Despite reporting lower results in the first half, Shell's stock managed to stay in the green, buoyed by the announcement of its second-quarter earnings that surpassed market expectations. Industry expert Biraj Borkhataria, head of global energy transition research at RBC Capital Markets, commented, "Today's results show continued strong operational performance.
Notably, Prelude utilization is now on par with Shell's broader liquefied natural gas (LNG) portfolio. The ongoing cost reduction initiatives have already yielded $1.7 billion in structural savings, suggesting the company is positioned to exceed its cost-cutting target of $2 billion to $3 billion by the end of 2025.
Overall, this is another resilient quarter for Shell." For the six months ending on June 30, income attributed to shareholders showed a decline, dropping from $11.84 billion last year to $10.87 billion this year. Adjusted earnings for the same period fell by 5%, landing at $14.03 billion. This dip in profitability can be attributed to several factors, including lower LNG trading and optimization margins, declines in realized LNG and gas prices, alongside other impairment charges.
The company's revenue also took a hit, decreasing to $146.94 billion from $161.54 billion year-over-year. In contrast, the second quarter saw attributable profit plummet by 52% to $3.52 billion, with revenue sinking slightly to $74.46 billion from $74.58 billion. Adjusted earnings, which Shell defines as net profit, fell by 19% to $6.29 billion; nevertheless, this figure surpassed analysts' estimates of $6 billion, according to reports from Reuters. "Shell reported strong earnings this morning, with a 5% beat at the bottom line.
The upstream sector was a key driver for this overachievement, supported by stronger than anticipated performance in marketing," RBC elaborated. They further noted, "The marketing outcomes are particularly surprising, especially given prior guidance suggesting flat quarter-over-quarter earnings in light of the trading update." The company's share buyback initiative is speculated to wrap up before Shell unveils its third-quarter results on October 31.
In London, Shell's shares were seen trading over 1% higher near midday. Additionally, Shell reiterated its expectations for cash capital expenditure in the range of $22 billion to $25 billion for the fiscal year 2024. Current Price (RMB): ¥2880.50, Change: ¥+40.50, Percent Change: +1.43%. $SHEL.