Shell’s Profit Drops by 83% in Q2 Due to Lower Oil and Gas Prices

This article was last updated on July 27, 2023

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USA: Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…Shell, one of the largest oil and gas companies, has reported a significant drop in profits for the second quarter of this year. The company’s bottom line profit was €3.1 billion, compared to a record profit of €18 billion during the same period last year. This decrease in profit can be mainly attributed to the decline in oil and gas prices.

Falling Oil and Gas Prices

The primary reason behind Shell’s profit decline is the decrease in oil and gas prices. The purchase price of gas on the Amsterdam TTF market, for example, has dropped from over €150 per megawatt hour a year ago to around €30 per megawatt hour currently. This significant decrease has had a substantial impact on Shell’s earnings. It’s worth mentioning that Shell had benefited greatly from the high gas prices last year, with the trading price even reaching over €300 in August.

Since December of last year, the gas price has consistently fallen, resulting in reduced earnings for Shell. Additionally, the company has also spent less on oil refining during this quarter.

Rewarding Shareholders

To enhance the value of its shares, Shell announced last month that it would pay more to its shareholders. The company believes that it is currently undervalued compared to its competitors. As part of this strategy, Shell has implemented cost-cutting measures and increased its dividend by 15%. In the previous quarter, the company paid a total of $5.6 billion to shareholders, including $2 billion in dividends and $3.6 billion in share buybacks.

Shell has now announced that it plans to repurchase its own shares for $3 billion in the coming months. Moreover, the company intends to add an additional $2.5 billion in share buybacks later this year.

No Reduction in Oil Production

Shell’s chairman of the board, Wael Sawan, announced last month that the company would not reduce its oil production. Previously, in 2021, Shell had announced that oil production would decrease by 1 to 2 percent annually, with the peak in 2019. However, Sawan stated that the reduction target has been achieved. Shell firmly believes that oil and gas will remain significant sources of energy in the long term and anticipates a gradual decline in demand for fossil fuels. Consequently, the company plans to invest $40 billion in oil and gas over the coming years, compared to $10 to $15 billion invested in lower carbon energy solutions.

Conclusion

Shell’s profit drop of 83% in the second quarter reflects the impact of lower oil and gas prices. Although the company has experienced a significant decline in earnings, it remains committed to rewarding its shareholders and investing in the future of oil and gas. Shell’s confidence in the long-term demand for fossil energy has led them to continue their oil production without any reduction plans. As the global energy landscape evolves, Shell’s approach will be closely watched by both investors and industry observers.