Second-quarter profits for Shell and TotalEnergies took a significant plunge from the high earnings of 2022, as oil and gas prices, refining margins, and trading results all weakened.
The surge in oil and gas prices last year followed Russia’s invasion of Ukraine, but these energy prices have seen a substantial dip this year due to diminishing fears of shortages and global economic challenges.
Both companies failed to meet earnings predictions on Thursday. They each reported a headline profit of roughly $5 billion for April-June, indicating a 56% year-on-year drop at Shell and a 49% decrease at TotalEnergies. However, these results align closely with Shell’s 2021 performance, while TotalEnergies surpassed its pre-invasion results.
Shell’s shares declined 1.9% at 0755 GMT, and TotalEnergies’ shares dropped 0.4%, against a 1% fall in the European index of oil and gas companies.
Shell announced a reduction in its share buyback program to $3 billion for the next three months and $2.5 billion following that, while TotalEnergies maintained a planned $2 billion for the third quarter.
Shell also announced a 15% quarter-on-quarter increase in its dividend, in line with expectations.
Shell’s CEO Wael Sawan praised the company’s “strong operational performance… despite a lower commodity price environment,” while TotalEnergies’ Chief Patrick Pouyanne recognized a “softening oil and gas environment” for the quarter.
On Wednesday, Norway’s Equinor reported a 57% fall in second-quarter profits from the previous year.
In the second quarter of 2023, benchmark Brent crude prices averaged $80 a barrel, compared to $110 a year earlier. Prices for liquefied natural gas (LNG), a critical product for both groups, fell to $11.75 per million British thermal units (mmBtu) from around $33.
TotalEnergies projects average LNG prices to hover between $9 and $10 mmBtu in the third quarter, but expects an increase to $15 mmBtu during winter due to demand from Asia and Europe.
The benchmark front-month Dutch gas contract last traded at 30.70 euros per megawatt hour, a decline from above 100 euros last year – including a spike to over 300 euros in August – and 70 euros at the start of this year.
Both Shell and TotalEnergies warned of decreasing profits from refining crude oil into fuel and chemicals for the quarter. Shell’s adjusted earnings in that sector were down 78%.
TotalEnergies attributed the decrease in European refining margins to an upswing in Chinese exports and a quicker-than-expected distribution of Russian crude and oil products to global buyers after the EU imposed an embargo.
