Shell Reports Strong Q1 Profit, Beats Expectations on Red Sea and Russia Disruptions

Shell plc reported a first-quarter profit of $7.7 billion, significantly exceeding market expectations. The strong performance was driven by disruptions in the Red Sea and Russia, which boosted the company's oil refining and trading operations.

Shell's adjusted earnings for the quarter came in at $7.7 billion, beating the average analyst estimate of $6.25 billion. This was down from $9.65 billion a year earlier but still ahead of forecasts. The company's chemicals and products divisions, including refining and oil trading, saw a more than threefold increase in adjusted earnings from the previous quarter, driven by strong gains from trading and refining.

Disruptions to shipping in the Red Sea and outages at Russian refineries due to Ukrainian drone attacks contributed to the boost in refined oil product trading. Shell also timed its refinery maintenance to the last quarter of 2023, giving it an advantage in supplying oil products.

Shell's liquefied natural gas (LNG) trading business also reported results well ahead of market expectations, though earnings were 7% below the previous quarter's bumper trading results. The company's overall oil and gas production rose by 3% in the quarter.

Why this matters: Shell's strong performance demonstrates the company's resilience and ability to capitalize on market disruptions. The results also highlight the ongoing importance of oil and gas in the global energy mix, despite the transition to cleaner energy sources.

Wael Sawan, Shell's CEO, stated that the company delivered strong operational and financial performance, demonstrating its focus on delivering more value with less emissions. Shell announced a $3.5 billion share buyback programme over the next three months, matching the amount in the previous two quarters.

Shell kept capital expenditure in check at $4.49 billion, down from $7.11 billion, forecasts, update in the prior period. The company aims to be selective with investments, focusing on high-return businesses. Shell also reduced its net debt by $3 billion in the quarter to $40.51 billion.

Looking ahead, Shell expects to seek renewal of shareholder authority to buy back shares at subsequent Annual General Meetings. The company has entered into an arrangement with a single broker to enable the purchase of up to 360,000,000 ordinary shares on both London and Netherlands exchanges under the program.

Key Takeaways

• Shell reported Q1 profit of $7.7B, exceeding market expectations.
• Strong performance driven by disruptions in Red Sea and Russia.
• Shell's chemicals and products divisions saw over 3-fold increase in earnings.
• Shell announced $3.5B share buyback program over next 3 months.
• Shell reduced net debt by $3B and aims to be selective with investments.