Shell raises share buyback as third-quarter earnings climb on stronger fuel margins

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Shell boosts buyback on Q3 gains

Highlights

Shell reports $10.8bn in third-quarter adjusted earnings, beating estimates and raising its quarterly share buyback to $5bn from $3bn.
Refined fuel profits surge to $3.8bn as Shell's refining margin hits a record $42 per barrel, offsetting the impact of slightly lower oil prices.
Despite operational disruptions in Germany and Qatar, global diesel shortages and Middle East conflict drive higher oil, gas, and fuel prices, boosting Shell's returns.

Third-quarter earnings and shareholder returns

As reported by Financial Times, Shell says its adjusted earnings reach $10.8bn in the third quarter, its second-highest result on record and above analysts' consensus forecast of $10.3bn. The company says the performance supports a $5bn share buyback programme for the next three months, up from the previous quarterly level of $3bn.

Wael Sawan, Shell's chief executive, says the company is delivering "very strong results" during a period of "severe disruption to the global energy system". The higher buyback marks a reversal from May, when Shell trimmed repurchases as it sought to protect its balance sheet during uncertainty linked to the Iran war.

Shell says it also improves on the previous quarter, when it posted adjusted earnings of $9.8bn. Profits for the April-to-September period come in just below the record $20.9bn the company made in the same six-month span in 2022, when Europe's break from Russian pipeline gas after Russia's full-scale invasion of Ukraine helped trigger an energy crisis.

Refining gains offset operational pressure

Shell says slightly lower oil prices do not prevent earnings growth because refined fuel prices, especially diesel, rise sharply. Third-quarter profits from refined fuels increase to $3.8bn, while the company's refining margin climbs from $24 a barrel in the second quarter to a record $42.

The company says global diesel shortages are helping lift returns across its downstream business. At the same time, low water levels in the Rhine over the summer affect operations at Shell's refining and chemical plants in Germany.

Shell also says damage to its Pearl gas-to-liquids plant in Qatar from an Iranian missile reduces production. Even so, the wider Middle East conflict is increasing profits for Shell and other energy groups, as higher prices for oil, gas and fuels outweigh some of the operational disruption.

In our earlier article on conflict-driven spikes in oil shipping costs, we examined how attacks and rerouting risks in key corridors such as the Strait of Hormuz and the Red Sea were pushing tanker and insurance rates sharply higher. We noted that these added transport costs can feed through into fuel and consumer prices while pressuring importers and refiners, even as tanker owners benefit from record earnings.

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