By Joe Hoppe
Shell PLC on Thursday reported third-quarter earnings that fell 18% on quarter, citing lower trading and margins and higher expenses, and kicked off a $4 billion share-buyback program.
The energy giant posted adjusted earnings of $9.45 billion for the period, down from $11.47 billion in the second quarter but beating market expectations of $9.0 billion, provided by Vara Research and averaged from 27 analysts’ estimates. Last year, it posted third-quarter adjusted earnings of $4.13 billion.
Shell said the on-quarter earnings decline reflected lower liquid natural gas trading and optimization results, lower chemicals and refining margins, higher underlying operating expenses and losses from fair value accounting and impairment charges.
This was partly offset by increased volumes from higher-value barrels in its Deep Water division.
Adjusted earnings before interest, taxes, depreciation and amortization came in at $21.51 billion, down from $23.15 billion in the second quarter and above market expectations of $20.72 billion, provided by Vara and based on 21 analysts’ estimates.
Net income was $6.74 billion compared with $18.04 billion in the second quarter, which included net losses of $1.0 billion due to the fair value accounting of commodity derivatives and $0.4 billion in impairment charges, swinging from a $5.2 billion net profit for the second quarter.
Total production available for sale in the quarter fell 5% on quarter to 2.77 million oil-equivalent barrels a day.
Cash flow from operations fell 33% to $12.54 billion, mainly driven by working-capital outflows of $4.2 billion and tax payments of $3.4 billion.
Shell declared a quarterly dividend of $0.25 a share, in line with the second quarter.
Looking forward, Shell forecast capital expenditure to be in the $23 billion-$27 billion range for the whole of 2022. It expects corporate adjusted earnings to be a net expense of around $450 million to $650 million in the fourth quarter, and a net expense of around $2.20 billion to $2.40 billion for the full year.
In the fourth quarter, production from the integrated gas division is expected to average 910,000-960,000 oil-equivalent barrels a day, while LNG liquefaction volumes are projected at 7.0 million-7.6 million metric tons. Upstream production is seen at 1.75 million-1.95 million oil-equivalent barrels a day.
The oil-products business is expected to deliver sales volumes of 2.25 million-2.75 million barrels a day, with refinery utilization of 88%-96%. As for the chemicals division, fourth-quarter plant utilization is expected at 72%-80%, and sales volumes at 2.70 million-3.20 million tons.
The company also said it will hold a share buyback program, to reduce its share capital. All shares repurchased across both the London and Netherlands exchanges will be cancelled. The program is expected to complete within three months.
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