Shell has reported a better-than-expected 70% surge in half-year earnings, reaching $16.75bn (£12.55bn), thanks to its best quarterly performance in four years. The FTSE 100 giant capitalised on volatile crude prices amid the Iran war, with second-quarter underlying earnings hitting $9.84bn (£7.37bn) – more than double the $4.26bn posted a year earlier and up sharply from $6.92bn in the previous quarter.
Strong Performance from Oil Trading
The group's underlying earnings at its chemicals and products unit, including its oil trading business, jumped to $2.88bn (£2.15bn), significantly up from $118m (£141m) a year ago. This helped offset a 31% drop in gas production due to an Iranian attack on its Qatar gas-to-liquids plant at the start of the Middle East conflict.
Chief executive Wael Sawan said: "Shell's 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."
Impact of Oil Price Swings
Shell has profited from trading on oil price swings, with Brent crude surging to $120 a barrel at one stage before dropping to pre-war levels and then rising past $90 this week amid fraught US-Iran negotiations. Its oil trading division had already seen earnings more than quadruple year on year in the first quarter.
However, Shell's Pearl GTL site in Qatar stopped production in March after being hit during attacks, and LNG facilities partly owned by Shell were also affected. The company expects to take a year to repair the Pearl site and restore production.
Refining and Operational Adjustments
The group has ensured its oil refineries are working at full capacity, with record utilisation of 102%, and global refining jet volumes up 20% year on year. Chief financial officer Sinead Gorman said the group was focusing on delivering for customers but stressed the importance of reopening the Strait of Hormuz for shipping. The strait has been effectively blocked since the war began on February 28, with only a brief reopening during a US-Iran interim peace deal in June. Recent hostilities have again closed the waterway.
There has also been disruption in the Red Sea after attacks by Houthi rebels this month, leaving only the Suez canal fully open for Gulf oil movement. Gorman noted that the industry was working hard to offset shipping disruptions but warned that "as this gets more prolonged… the levers that the industry has to pull get less."
Share Buybacks and Market Reaction
In its half-year results, Shell announced it would hold share buybacks at the recently reduced rate of $3bn (£2.24bn) per quarter for the three months to September. Shares rose as much as 2% in early trading.
Derren Nathan, head of equity research at Hargreaves Lansdown, commented: "One consequence of the disruption in the Middle East is higher realised prices. Another is heightened volatility on which the group's trading division thrives. Adding in new production in Brazil and the Gulf of America, and refineries running at full capacity has led to a very strong performance on the bottom line."
