ENERGY giant Shell beat expectations to deliver a first-quarter profit of nearly $8 billion despite disruptions in Russia and the Red Sea, pledging to give shareholders $3.5bn (£2.8bn) in share buybacks over the next three months.

Shell, which is expected to clash with a group of shareholders with a combined 5% holding who want to see the company commit to tighter climate targets and have put forward a resolution to this effect at the AGM later this month, reported adjusted earnings of $7.7bn for the first quarter.

This was below the $9.6bn booked in the same quarter last year but still ahead of the $6.5bn predicted by analysts. Europe’s biggest oil and gas operator’s cash flow jumped 6% from the previous quarter to $13.3bn.

Shell’s chief financial officer Sinead Gorman, declaring that “2024 is off to a good start”, said: “We delivered yet another set of strong operational and financial results in the first quarter.

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“In upstream, our conventional oil and gas business performed very well, with many of our core assets delivering high controllable availability. We also started production at our Rydberg field, which is connected to our Appomattox production hub, reinforcing our leading deep-water position in the Gulf of Mexico where our oil production has some of the lowest greenhouse gas intensity in the world. This is another project that supports the energy security the world needs and underpins the longevity of our cash flows.”

During Q1, Ms Gorman noted, Shell’s Polymers Monaca petrochemicals plant near Pittsburgh had ramped up to full operation while in its renewables and energy solutions business “we have strategically diluted part of our stake in the Texan Brazos wind farm, while keeping access to 100% of the offtake as part of our integrated power strategy”.

She added: “In the first quarter, we had high liquefaction volumes coupled with strong seasonal trading and optimisation in our integrated gas business even though market conditions were less favourable than in Q4. In chemicals, we saw marked improvement in performance compared with previous quarters, and we still have potential for further growth.”

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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Analysts were largely impressed with Hargreaves Lansdown’s head of equity research, Derren Nathan, describing first-quarter cash flows as “staggering”, noting: “Shell’s produced yet another quarter of staggering cash flows. Higher margins and up time at its refineries more than offset lower earnings in the upstream and integrated gas divisions.

“The strong cash generation is enabling Shell to reduce debt, reward shareholders (it’s also raised the dividend 20% year-on-year) and continue investing into the business as it targets total expenditure of $22-$25bn in both 2024 and 2025.

“Shell remains ‘committed to oil and gas’ which may disappoint environmentalists, but it’s made meaningful reductions in its Scope 1 and 2 emissions in recent years and slightly increased its renewable power generation capacity in the quarter.”

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Pointing out that the energy giant’s development portfolio has a wide spread of projects across the energy mix, from the deepwater Mero fields in offshore Brazil through to the 1.5GW Atlantic Shores offshore wind farm, the largest such project in the United States, he added: “There’s no doubting Shell’s relentless focus on shareholder value and over the long-term the sub-10 times earnings multiple doesn’t look too demanding.

“Price volatility is an ever-present risk across the sector but it’s one that Shell is navigating admirably.”

At RBC Brewin Dolphin, investment manager Stuart Lamont noted: “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.”

However, AJ Bell investment director Russ Mould noted that profit was “still down appreciably year on year, reflecting the broader industry trend”, adding: “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.

“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.”