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July 27 (UPI) — Shell, an energy company, announced a second-quarter profit of $5.1 billion, a significant decrease from the first quarter due to declining commodity prices.
Shell’s second quarter performance was significantly lower compared to the $9.6 billion reported for the first quarter. The company attributed the majority of this decline to lower crude oil and natural gas prices, as well as weaker refining margins.
Refining margins represent the cost of refined petroleum products relative to market prices. The price of Brent crude oil, which is the global benchmark for oil prices, averaged $81.17 per barrel in the first quarter but fell to $78.31 per barrel during the three-month period ending in June.
Shell could potentially see a recovery in profits during the third quarter with Brent trading at around $83 per barrel.
Wael Sawan, the company’s chief executive, remains committed to returning value to shareholders. Dividends have increased by 15% and the company is exceeding its guidance of $3 billion in share buybacks.
“As we deliver more value with fewer emissions, we will continue to prioritize share buybacks, given the value that our shares represent,” he said.
Shares of Shell dropped nearly 2% in early trading, reaching the low $60 range.
Major energy companies have faced criticism for prioritizing shareholder returns over future production. Analysts anticipate a supply shortage in the second half of the year, partly due to production restraint from OPEC+ and non-member states like Russia.
Shell also revised its spending forecast for the year, reporting an average production of 1.87 million barrels of oil equivalent per day in the first quarter, but only 1.7 million BOE/d in the three-month period ending in June.
The outlook for the year sets the high-water mark at 1.8 million BOE/d. Although first-quarter profits were close to $10 billion, they were approximately $200 million lower than the fourth quarter of 2022.
Shell has previously found support in its natural gas segment when it comes to energy trends. While the company is investing in emerging and cleaner energy alternatives, it maintains a focus on fossil fuels.
Last month, the Advertising Standards Authority, a British advertising watchdog, accused Shell of misleading consumers with ad campaigns promoting its low-carbon focus while its actual business model revolves around oil and gas.
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