Shell beats estimates as profit hits $7.7bn, unveils $3.5bn buyback

(Sharecast News) - Oil and gas giant Shell on Thursday reported much better-than-expected first-quarter earnings on the back of higher margins from crude and oil products trading and also unveiled a new $3.5bn share buyback. Adjusted earnings rose 6% to $7.7bn for the first three months of the year, smashing estimates of $6.5bn but lower than the $9.6bn reported in the first three months of 2023 as energy companies cashed in on surging oil and gas prices.

Adjusted earnings before interest, tax depreciation and amortisation came in at $18.7bn compared with $16.3bn in the fourth quarter, but lower than the $21.2bn reported in the first quarter of 2023.

LNG production rose 7% quarter on quarter to 7.58 million metric tons, but sales were 7% lower to 16.87 million tons. Overall oil and gas production rose by 3% in the quarter to 2.91 million barrels of oil equivalent per day.

"Chief executive Wael Sawan is desperate to close the valuation gap on the company's American rivals. His focus on this aim has resulted in a dialling back of environmental commitments and the none too subtle hints about moving the primary listing across the Atlantic," said AJ Bell investment director Russ Mould.

"While he can do nothing about the volatility in commodity prices, Sawan has managed to deliver lower costs and lower debt and improved the group's profitability, increasing volumes and demonstrating a decent level of capital discipline.

"Sawan and Shell continue to face a tricky balancing act between growing the business, delivering generous shareholder returns and dealing with pressure from institutions, politicians, regulators and the wider populace over its environmental impact.

"The actions of a group of investors representing 5% of Shell's share capital - who are pushing for the company to stick to tighter climate targets and have put forward a resolution to this effect at the AGM later this month - are a reminder of these pressures."

The resolution, led by activist shareholder Follow This, is due to be voted on at Shell's annual general meeting on May 21. Other signatories include Amundi, Axa IM and Scottish Widows.

It calls on Shell to align its medium-term carbon emissions reduction targets with the Paris Climate Agreement, including emissions from fuels burnt by consumers, known as Scope 3 emissions. The company's board has urged shareholders to vote against it.

Reporting by Frank Prenesti for Sharecast.com