Shell Launches $3.5 Billion Buyback After Earnings Beat Forecasts — 2nd Update

By Christian Moess Laursen

Shell's first-quarter adjusted earnings fell by less than expected, buoyed by strong margins from crude and oil trading, while the energy giant kicked off a $3.5 billion share buyback program as it hurries to close the valuation gap between it and its U.S. rivals.

The British energy major on Thursday reported adjusted earnings of $7.73 billion for the quarter, down from $9.65 billion in the same quarter a year ago, but ahead of market expectations provided by Vara Research of $6.46 billion.

The London-based company said the trading gains were driven by lower operating expenses, increased margins from crude and oil products and on refining, offsetting lower liquefied natural gas trading.

Total oil and gas production increased by 10% from the fourth quarter mainly due to lower maintenance at the Prelude platform offshore Australia and at the Pearl gas-to-liquids plant in Qatar.

Its integrated natural-gas segment accounted for $3.68 billion in adjusted earnings, while the upstream business stood for $2.27 billion. Both segments beat market forecasts, according to Vara Research.

Shell continues to reward shareholders, with a $3.5-billion share buyback program set to complete by the release of its second-quarter results, having completed a similar buyback program following its fourth-quarter results. Meanwhile, the company also raised its dividend payout to 34.40 cents a share from 28.75 cents in last year's first quarter, taking total shareholder returns to $5.0 billion.

Generous shareholder remunerations are one way for Shell and other European energy majors to address the valuation gap between them and their U.S. rivals. Since taking the reins January last year, Chief Executive Wael Sawan has focused on execution, maximizing the value of assets and generating profits to fund shareholder returns, in part to close the gap on Chevron and Exxon.

Another way could be to move listing to New York, where investors might be more willing to buy stock in oil-and-gas companies. Last week, TotalEnergies' chief executive said the French major could move its primary listing to New York from Paris, while Sawan has said he is keeping all options open if Shell doesn't catch up.

Chevron and Exxon reported falling first-quarter profits last week as their run of record-setting results tapered off, with oil-refining margins and natural-gas prices returning from postpandemic peaks. Still, they booked $13.7 billion combined.

Shell's first-quarter profit on a current cost of supplies basis--a figure similar to the net income that U.S. oil companies report--was $7.16 billion, down from $9.26 billion in the fourth quarter.

Cash flow from operations--a measure of cash a company generates from normal business operations--was $13.33 billion, beating market forecasts of $13.19 billion.

The world's largest liquefied natural-gas trader produced 992,000 oil-equivalent barrels a day of integrated gas in the quarter, while liquefied LNG volumes were 7.6 million metric tons, and the upstream output was 1.872 million daily oil-equivalent barrels, in line with Shell's expectations.

For the second quarter, Shell targets an integrated-gas production between 920,000 to 980,000 oil-equivalent barrels a day, LNG volumes of between 6.8 million and 7.4 million tons, with an upstream output of 1.63 million to 1.83 million BOE a day.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

May 02, 2024 03:15 ET (07:15 GMT)

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