Shell Posts Q1 Profit of $9.65 Billion, Beats Analysts' Forecasts:
Oil giant Shell posted a net profit of $9.65 billion in the first quarter of 2023, beating analysts' forecasts, driven by strong fuel trading and liquefied natural gas (LNG) sales. Despite cooling energy prices, Shell's earnings were stronger than expected, following a trend among its rivals, such as BP, Exxon Mobil, and Equinor, which have also reported higher-than-expected quarterly profits. However, lower natural gas prices weighed on Shell's giant integrated gas business, which saw a slump of 18% to $4.9 billion in profits. Nonetheless, this was offset by a 139% jump in profits to $1.8 billion in its chemicals and refined products unit.
Shell's Strong Operational Performance:
According to Jefferies analyst Giacomo Romeo, Shell showed "strong operational performance in the quarter across all divisions, with oil and gas trading playing a key role." This was reflected in the company's adjusted earnings of $9.65 billion, which exceeded a company-provided analyst forecast of $8 billion. The company's shares rose 2.5% in early London trading.
LNG Production Boost:
As the world's top LNG trader, Shell saw LNG production rise in the quarter, thanks to higher uptime at its Prelude floating facility off the coast of Australia. The company maintained its 2023 capital spending plans unchanged in a range between $23 and $27 billion.
Dividend and Share Repurchase:
Shell kept its dividend unchanged at $0.2875 per share and also maintained the rate of its share repurchase programme at $4 billion over the next three months, even as its cash generation fell in the quarter. In the year to February 2023, the company bought back $19 billion in shares, nearly double the total in pre-pandemic 2019.
Management Structure:
Shell's Chief Executive Officer Wael Sawan has introduced a new management structure since taking office in January, which includes placing the company's renewables and low-carbon operations under the downstream division.
Conclusion:
Shell's strong Q1 performance can be attributed to its robust fuel trading and LNG sales. While lower natural gas prices weighed on the company's giant integrated gas business, it was offset by a jump in profits in its chemicals and refined products unit. Shell's decision to maintain its dividend and share repurchase program, even as its cash generation fell, reflects the company's confidence in its future growth prospects. Additionally, the company's new management structure shows its commitment to renewables and low-carbon operations, reflecting the changing energy landscape.
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