Shell Reports 32% Drop in Q2 Profit Amidst Lower Oil Prices and Chemicals Losses, But Beats Forecasts

Shell’s second-quarter net profit plunged by almost 32% on Thursday, impacted by a drop in oil prices, weaker gas trading results, and losses linked to an outage in its chemicals operations. However, despite these challenges, the oil major exceeded analysts’ expectations with a reported $4.26 billion in adjusted earnings, significantly outperforming the $3.74 billion forecast from an analyst poll.

Key Highlights:

• Profit Decline: Shell’s profit fell by 32% from the same period last year, but it managed to beat forecasts.
• Cost-Cutting Success: The company achieved $3.9 billion in cost reductions compared to 2022, part of its plan to save $5-7 billion by the end of 2028.
• Share Buybacks: Shell continued its commitment to returning cash to shareholders, announcing a $3.5 billion share buyback program, maintaining the pace for the 15th consecutive quarter.
• Revenue Sources: Despite the profit drop, Shell’s marketing unit—which includes retail fuel and charging stations—saw higher margins during the summer driving season, helping to partially offset other challenges.

Challenges and Setbacks:

• Oil Price Slump: Crude prices fell in the quarter, with Brent crude averaging $67 per barrel, down from $75 in Q1 and $85 a year ago. This slump in oil prices is linked to OPEC+ unwinding self-imposed production cuts.
• Chemicals Sector Losses: Shell’s chemicals business was hit by a U.S. Monaca polymer plant outage, coupled with weak demand and poor margins in the industry.
• LNG Market Concerns: After seeing lower demand for liquefied natural gas (LNG) in the first half of the year, Shell expects tighter LNG markets post-summer.

Shell’s stock rose by 1.7% as it navigated these challenges, outperforming the broader European energy index, which saw a modest 0.5% rise. While oil price volatility and trade tensions remain risks, Shell’s robust buybacks and dividend policies helped reassure investors about its long-term strategy.

Despite current challenges, Shell continues to focus on growth and operational efficiency, positioning itself to weather economic headwinds while delivering value to shareholders.