Shell, TotalEnergies profits slump as oil, gas prices cool after bumper 2022

By Shadia Nasralla, Ron Bousso and America Hernandez

LONDON/PARIS (Reuters) -Shell and TotalEnergies reported sharp falls in second-quarter profit from bumper 2022 earnings as oil and gas prices, refining margins and trading results all weakened.

Oil and gas prices soared last year in the wake of Russia’s invasion of Ukraine but energy prices have dropped sharply this year as fears of shortages eased amid global economic challenges.

Both companies missed earnings forecasts on Thursday, recording headline profit for April-June of around $5 billion each, down 56% year-on-year at Shell (LON:) and 49% at TotalEnergies. Still, this was broadly in line with Shell’s performance in 2021, while TotalEnergies outperformed its pre-invasion results.

Shell’s shares were down 1.9% at 0755 GMT and TotalEnergies’ slipped 0.4%, compared with a 1% decline in the European index of oil and gas companies.

Shell slowed the pace of its share buyback programme to $3 billion in the next three months and $2.5 billion thereafter, while TotalEnergies stuck to a flagged $2 billion for the third quarter.

Shell also raised its dividend by 15% quarter-on-quarter, as expected.

Shell’s Chief Executive Wael Sawan said the company showed “strong operational performance… despite a lower commodity price environment”, while TotalEnergies’ Chief Patrick Pouyanne said the quarter showed a “softening oil and gas environment.”

Norway’s Equinor reported on Wednesday a 57% drop in second-quarter profits from a year earlier.

Benchmark prices averaged $80 a barrel in the second quarter of 2023, compared with $110 a year earlier. Prices for liquefied (LNG), a key product for both groups, dropped to $11.75 per million British thermal units (mmBtu) from around $33.

TotalEnergies expects average LNG prices to linger between $9 and $10 mmBtu in the third quarter, but anticipates a rise to $15 mmBtu over winter due to Asian and European demand.

The benchmark front-month Dutch gas contract last traded at 30.70 euros per megawatt hour, down from above 100 euros last year – including a spike to over 300 euros in August – and 70 euros at the start of this year. [NG/EU]

Both Shell and TotalEnergies had flagged shrinking profit from refining into fuel and chemicals in the quarter. Shell’s adjusted earnings in that business were down 78%.

TotalEnergies said European refining margins dropped due to a surge in Chinese exports and quicker-than-expected Russian crude and oil products finding global buyers after the EU imposed an embargo.