Shell beats expectations as cost-cutting plans boost profitability

By Louis Goss

Shell on Thursday beat expectations for the second quarter in a row as it successfully boosted its profitability through cost-cutting initiatives, in the face of lower oil and natural gas prices.

The British oil giant posted a 12% increase in its second-quarter profits to $6.3 billion, even as it reported a 1% drop in revenue to $75.1 billion following a drop in energy prices from the record highs a year ago.

The London headquartered company, in turn beat forecasts from 21 analysts polled by Shell itself that it would generate $6.0 billion in adjusted earnings.

Shares in Shell (UK:SHEL) (SHEL), listed on the London Stock Exchange, increased 1% on Thursday having gained 23% in the previous 12 months.

The increase in Shell's profits came as the company said it has successfully cut its costs by $1.7 billion since CEO Wael Sawan first outlined plans to reduce the oil major's overheads by up to $3 billion in June 2023.

The supermajor said $700 million worth of savings were made in the first half of 2024 alone, including by making a series of layoffs.

Shell posted a sharp 224% increase in earnings from its integrated gas unit which runs its highly profitable liquified natural gas (LNG) business, driven by higher volumes and lower costs.

The energy giant noted LNG prices have now started to return to levels seen before Russia's invasion of Ukraine, which caused oil and gas prices to surge in 2022.

The oil major, in turn, announced the launch of another $3.5 billion share buyback initiative, after having previously vowed to buy back $3.5 billion worth of its stock in the first quarter.

The company said it plans to stick to its lowered capital expenditure plans that are set to see it spend $22 billion to $25 billion this year.

-Louis Goss

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08-01-24 0846ET

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