SHELL’S first-quarter performance may be “staggering”, as one analyst put it, but the energy giant still has a lot of work to do if it is convince investors that it is committed to tighter climate targets.
It may have delivered a profit of nearly $8 billion despite disruptions in Russia and the Red Sea, but pledging to give shareholders $3.5bn (£2.8bn) in share buybacks over the next three months might be seen as move to sweeten shareholders ahead of Shell’s AGM later this month. But the result is impressive nonetheless and chief executive Wael Sawan has delivered a solid set of numbers.
Oil and gas giant Shell reports sharp fall in profits
As Stuart Lamont, investment manager at RBC Brewin Dolphin, put it: “Shell has beaten expectations by a reasonable margin, despite the impact of lower gas prices during the first quarter. Earnings are up, costs have fallen, and the oil and gas major has brought debt down too – all in all, it’s a solid set of numbers and underlines why the market, generally, remains bullish on Shell.”
AJ Bell investment director Russ Mould, however, noted that profit was “still down appreciably year on year, reflecting the broader industry trend”. And he added: “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.”
But he said: “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.”
And Mr Mould warned that “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”.
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There was no such concern from Shell’s chief financial officer Sinead Gorman, however, who declared that “2024 is off to a good start”, adding: “We delivered yet another set of strong operational and financial results in the first quarter.”
She noted that Shell’s products business was strong, particularly in trading and optimisation, where the company was able to “capture high margins due to global product supply disruptions”.
Ms Gorman added: “We continue to be disciplined about our capital spend, and our balance sheet is strong. And for the rest of 2024, we will keep driving performance, focus on our strengths, and continue to deliver more value with less emissions.”
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Shell’s Q1 profit was below the $9.6bn booked in the same quarter last year but still ahead of the $6.5bn predicted by analysts, while Europe’s biggest oil and gas operator’s cash flow jumped 6% from the previous quarter to $13.3bn.
So, all in all, a very solid set of numbers as alluded to by RBC Brewin Dolphin’s Stuart Lamont. But all eyes will be on that AGM on May 21.
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