Oil giant Shell beats second-quarter profit expectations

British oil giant Shell posted better-than-expected second-quarter profit on Thursday despite lower refining margins and weaker liquefied natural gas trading.

The oil and gas major reported adjusted profit of $6.3 billion for the three-month period to the end of June, beating analysts’ expectations of $5.9 billion, according to estimates compiled by LSEG.

Shell’s second-quarter profit fell 19% compared with the first three months of the year. The company reported adjusted earnings of $7.7 billion for the first quarter of 2024.

Shell announced it will launch a $3.5 billion share buyback program over the next three months, a similar rate to the previous quarter. The company’s dividend remains unchanged at 34 cents per share.

“We are in a good place and we have good momentum as we see it, but there is still a lot of work to be done,” Shell Chief Executive Wael Sawan told CNBC’s “Squawk Box Europe” on Thursday.

Asked where Shell is on its journey to create a more disciplined and value-focused company, Sawan said: “We are halfway there. We had talked about a 10-quarter sprint. We are literally at the beginning of the fifth quarter right now and we are making great progress.”

Sawan cited “significant improvements” in areas such as costs, capital discipline and operational performance.

Shell’s chief executive said the company had completed $1.7 billion in structural cost reductions from 2022, and outlined the company’s goal of reducing costs by $2-3 billion by the end of next year.

The company’s London-listed shares rose 1.4% on Thursday morning. Shell’s share price is up more than 11% so far this year, outperforming its European peers.

On Tuesday, British rival BP raised its dividend and extended its share buyback program after posting better-than-expected profits. U.S. oil giants Exxon Mobil and Chevron are scheduled to report second-quarter results on Friday.

Shell recently warned it expected to take an impairment charge of up to $2 billion after the sale of its Singapore refinery and the suspension of construction at its Rotterdam plant site in the Netherlands.

Shell confirmed in early May that it had agreed to sell its refinery and petrochemical assets in Singapore to a joint venture between Indonesian petrochemical firm PT Chandra Asri and Swiss trading company Glencore.

The transaction, expected to be completed by the end of the year, was seen as part of Sawan’s plans to reduce Shell’s carbon footprint and focus on its more profitable businesses.

John Moore, senior investment manager at RBC Brewin Dolphin, described Shell’s second-quarter results as “solid” and said they “underline why the market is generally optimistic about the company’s prospects.”

“Shell has been more direct in its commitment to oil and gas for the foreseeable future, and that should support the company’s returns over the medium term,” Moore said.

“However, there is the perennial question about its path to net zero, which many shareholders will be interested to hear more about in future updates.”

Some Shell shareholders have expressed concerns about the company’s energy transition strategy after it watered down its 2030 carbon reduction target and scrapped a 2035 goal, citing “uncertainty in the pace of change in the energy transition.”

Asked on Thursday whether Shell remained committed to its pledge to become a net-zero emissions company by 2050, Sawan said: “We are absolutely committed to the 2050 target, but we also recognise that the path from here to there is not linear.”

He added that there would be “important twists and turns” and that the company was “exercising strategic patience” to focus on opportunities that can create value both today and in the long term.