Shell and TotalEnergies profits cut in half by lower oil prices

By Hanna Ziady, CNN

London (CNN) — Shell and TotalEnergies have reported a steep drop in second-quarter profits, as oil and gas prices fell from record highs reached following Russia’s full-scale invasion of Ukraine 17 months ago.

The sharp decline in earnings from two of the world’s biggest oil companies signals the end of a run of record-setting results for energy companies.

Shell, Europe’s largest oil company by revenue, reported adjusted earnings of $5.1 billion during the April-to-June period — less than half the $11.5 billion it reported a year ago. The result was also driven by lower production volumes and lower margins in its oil refining business, Shell said in a statement Thursday. The company’s stock fell 2% in London.

French oil company Total (TOT)Energies posted adjusted net income of $5 billion Thursday, a 49% drop on the same period a year ago.

Energy companies enjoyed bumper profits last year off the back of soaring oil and gas prices, and shareholders were rewarded handsomely.

Payouts from dividends and share buybacks across the five biggest Western energy firms — BP (BP), Chevron (CVX), ExxonMobil, Shell and TotalEnergies — exceeded $100 billion in 2022.

Prices for European natural gas and Brent crude, the global oil benchmark, are now lower than they were before the start of the Ukraine war in February 2022, meaning that shareholders may not enjoy the same windfall as last year.

While TotalEnergies kept share buybacks due for the quarter unchanged from a year ago at $2 billion, Shell said it would buy back $3 billion worth of shares — down 50% for the same period last year. The company increased its quarterly dividend by 15% to 33 cents per share.

Shell added that, subject to board approval, it would distribute “at least” another $2.5 billion via share buybacks following its third quarter results. That’s down from $4 billion for the third quarter of last year.

“Shell delivered strong operational performance and cash flows in the second quarter, despite a lower commodity price environment,” CEO Wael Sawan said.

Speaking to journalists, he also said Europe was going into winter “in a good place,” given growing renewable energy generation and levels of natural gas storage approaching historic highs.

According to Sawan, Shell is on track to cut planet-heating carbon emissions from its own operations in half by 2030, compared with 2016 levels.

But the company continues to direct more toward oil and gas production than renewables — part of a wider shift among energy companies back to fossil fuels, driven by last year’s jump in prices and growing demand for energy.

In the first half of the year, Shell invested $3.9 billion in oil and natural gas exploration and production. That’s down from $4.6 billion a year ago but significantly ahead of the $996 million it invested in its Renewables and Energy Solutions business, which includes electricity generation, hydrogen production, carbon capture and storage, and the trading of carbon credits.

Separately, the International Energy Agency said in a report Thursday that global coal consumption in 2023 would stay near the record level hit last year, as continued strong growth in demand in Asian economies outpaces declines in Europe and North America.

Chevron and ExxonMobil will report results Friday, with BP reporting next Tuesday.

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