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July 27 (UPI) — Energy company Shell reported a second quarter profit of $5.1 billion, a sharp decrease from the $9.6 billion reported in the first quarter due to a decline in commodity prices.
Shell’s second quarter performance pales in comparison to the previous quarter, mainly due to lower crude oil and natural gas prices, as well as weaker refining margins.
Refining margins reflect the costs of refined petroleum products relative to market prices. The price of Brent crude oil, the global benchmark, averaged $81.17 per barrel in the first quarter, but dropped to $78.31 per barrel in the three-month period ending in June.
However, there is potential for profit recovery in the third quarter as Brent crude is currently trading around $83 per barrel.
Despite the downturn in profits, Shell’s CEO Wael Sawan remains committed to delivering value to shareholders. The company has increased dividends by 15% and exceeded its guidance of $3 billion in share buybacks.
“As we continue to prioritize share buybacks and deliver more value with fewer emissions, we recognize the importance of our shares,” Sawan said.
In early trading, Shell’s shares were down nearly 2% and reaching the low $60 range.
Major energy companies have faced criticism for prioritizing shareholder returns over future production. Analysts predict that supplies will be limited 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 and reported a decline in production. In the first quarter, the company averaged 1.87 million barrels of oil equivalent per day, but this dropped to 1.7 million BOE/d in the three-month period ending in June. The company’s outlook for the year suggests a high-water mark of 1.8 million BOE/d. First-quarter profits were close to $10 billion, slightly lower than the fourth quarter of 2022.
While Shell has been investing in cleaner energy alternatives, it remains focused on fossil fuels. Last month, the Advertising Standards Authority criticized Shell for misleading consumers with low-carbon ad campaigns that contradict the company’s heavy reliance on oil and gas.
