Shell reports 2Q profit, raises shareholder returns

Shell has increased its dividend by 38pc and announced a $2bn share buyback programme after its second-quarter profits rose from a year earlier thanks to higher oil and gas prices.

The firm made a profit, excluding inventory effects, of $2.63bn in the April-June period, compared with a record, write-offs driven loss of $18.38bn a year earlier.

But profit was down from $4.35bn in the first quarter.

"Higher oil prices, one-off favourable tax impacts, higher marketing margins and lower operating expenses" were "partly offset by lower contributions from trading and optimisation," Shell said.

The firm announced share buybacks of $2bn, which it aims to be completed by the end of the year. It increased its dividend to 24¢/share from 17.35¢/share in the previous quarter, but still below pre-pandemic levels of 47¢/share. It cut its shareholder payouts last year in response to the oil price crash and the Covid-19 pandemic. The firm's policy to grow dividends by 4pc annually, subject to board approval, is unchanged.

"We are stepping up our shareholder distributions today, increasing dividends and starting share buybacks, while we continue to invest for the future of energy," Shell chief executive Ben van Beurden said.

In October last year, Shell said it would only target this increase to shareholder distributions once it had reduced its debt to $65bn, but said earlier this month that it would "retire" this debt milestone. Shell's debt fell to $65.73bn at the end of June from $71.25bn at the end of March, mainly driven by free cash flow generation. Its net debt gearing declined to 27.7pc from 29.9pc over the same period.

Shell's oil and gas output averaged 3.25mn b/d of oil equivalent (boe/d) in the second quarter, down by 7pc from a year earlier and from 3.49mn boe/d in the first quarter, partially because of higher maintenance activities. Production fell by 8pc year on year in the first half of 2021, partly the result of divestments, Shell said. It expects oil and gas production in the range of 2.97mn-3.17mn boe/d in the current quarter.

Shell's refinery throughput rose to 1.83mn b/d in the April-June quarter from 1.75mn b/d in the first three months of the year, as demand rose and unplanned downtime fell. This was was down from 1.94mn b/d a year earlier. Utilisation was 76pc in the April-June period, compared with 72pc in the first quarter. Shell expects third-quarter refinery utilisation at 73-81pc and oil product sales in a range of 4.3mn-5.3mn t.

By Rowena Edwards