Key Takeaways:
Shell's adjusted earnings more than doubled to $9.84 billion in the second quarter, the company said Thursday, beating analyst estimates as higher crude prices and record refinery utilisation offset production losses from the Middle East conflict.
"Our operational performance enabled very strong results during another quarter of severe disruption in global energy markets, as we worked hard to provide critical energy supplies and products to our customers," Chief Executive Officer Wael Sawan said in a statement.
Revenue rose 45 percent to $94.66 billion from $65.41 billion a year earlier. Adjusted earnings per share of $1.76 compared with the consensus estimate of $1.21, according to data compiled by GuruFocus. Cash flow from operations reached $21.4 billion, driven by adjusted EBITDA of $20.7 billion and a working capital inflow of $3.4 billion, partly offset by $2.9 billion in tax payments.
The results underscore Shell's ability to generate cash even as the Middle East conflict curbed Qatari production — Integrated Gas output fell 31 percent from the first quarter. The company announced a new $3 billion share buyback programme, plus $1.2 billion in repurchases carried over from a suspended programme, bringing total shareholder distributions in the quarter to $5.2 billion.
Chemicals and Products delivered the biggest earnings swing, posting adjusted earnings of $2.88 billion compared with $118 million in the year-ago period, as refinery utilisation hit a record 102 percent and global indicative refining margins rose to $24 a barrel from $17 in the first quarter. The segment's trading and optimisation unit also contributed strongly. Chemicals alone posted its best quarter since the third quarter of 2021, with adjusted earnings of $354 million.
Upstream adjusted earnings rose to $3.49 billion from $1.73 billion a year earlier, driven by higher realised liquids prices of $89 a barrel versus $72 in the first quarter. Production edged lower to 1.82 million barrels of oil equivalent per day as higher maintenance activity offset new output from Brazil and the Gulf of America. The company agreed in June to sell its 50 percent stake in the Na Kika platform in the Gulf of America for $1.7 billion.
Integrated Gas adjusted earnings climbed to $2.69 billion from $1.74 billion a year ago, with stronger trading and optimisation and higher realised prices partly offsetting a 31 percent production drop caused by the Middle East conflict's impact on Qatari volumes. LNG liquefaction volumes rose 15 percent to 7.73 million tonnes, boosted by the ramp-up at LNG Canada.
Marketing adjusted earnings of $1.33 billion were roughly flat with the first quarter, as lower lubricant margins and volumes were offset by favourable tax movements. The company completed the sale of Jiffy Lube International for $1.3 billion in June while retaining a long-term lubricants supply agreement.
Renewables and Energy Solutions posted adjusted earnings of $79 million, down from $348 million in the first quarter, as lower trading and optimisation results weighed on the segment. The unit recorded $536 million in impairment charges related to renewable generation assets in Asia and Europe. Shell agreed in July to sell its Sprng Energy business in India for $1.8 billion.
Balance sheet and capital allocation improved sharply. Net debt fell to $41.8 billion from $52.6 billion at the end of the first quarter, reflecting free cash flow of $17.5 billion. Gearing dropped to 18.7 percent from 23.2 percent. The company has delivered $5.8 billion in pre-tax structural cost reductions since 2022, with $700 million achieved in the first half of 2026.
The ARC Resources acquisition in Canada's Montney shale basin, valued at about $13.6 billion, received shareholder approval with 99.54 percent of votes cast in favour. The deal is expected to close in the third quarter, subject to remaining regulatory approval, and would boost Shell's production growth to a 4 percent compound annual rate through 2030 from a 2025 baseline.
Outlook: Shell expects Integrated Gas production of 570,000 to 630,000 barrels of oil equivalent per day in the third quarter, excluding volumes from ARC Resources and Qatar. Upstream production is forecast at 1.68 million to 1.88 million boe/d, reflecting higher maintenance. Full-year cash capital expenditure remains unchanged at $24 billion to $26 billion.
This article is for informational purposes only and does not constitute investment advice.
