Shell reported a 28% decline in its first-quarter net profit, bringing it down to $5.58 billion, but still exceeded analysts' forecasts. Despite a dip in oil prices and weaker refining margins compared to the previous year, the company maintained its share buyback program at a steady pace.
The oil giant confirmed it would repurchase $3.5 billion worth of shares over the next three months, marking the fourteenth consecutive quarter of buybacks of at least $3 billion. This stands in contrast to its competitor which has reduced its buyback efforts this year to bolster its balance sheet. Shell's gearing ratio, which measures debt against equity, is at 18.7%, significantly lower than BP's 25.7%.
“The main opportunity for me at the moment is the ability to buy back shares,” said Shell’s finance chief, Sinead Gorman, during a conference call. “If the share price falls—and I already believe it’s undervalued—then I have an even better opportunity to allocate capital and repurchase even more shares.”
In a strategy update in March, Shell outlined its intention to return more cash to shareholders, driven by expectations of higher sales in liquefied natural gas (LNG), primarily through buybacks. It also reduced its investment projections through 2028 and raised the possibility of reviewing its chemicals business.
When asked about the potential sale or closure of certain assets, Gorman stated that the company had set a deadline for decision-making by the end of the decade.
On Friday, Shell reaffirmed its investment budget for the year, which is set between $20 billion and $22 billion.
Its indicative refining margin stood at $6.2 per barrel, significantly lower than last year’s $12 per barrel, but an improvement from $5.5 per barrel at the end of 2023. Brent crude prices averaged around $75 per barrel in the first quarter of the year, compared to $87 per barrel in the same period last year.
Shell also reported that its gas trading business remained stable compared to the previous quarter, despite challenges from expiring hedging contracts. This contrasted with BP, which noted weaker performance in its gas trading business, leading to results that missed expectations.
“We managed to redirect several cargoes to more profitable markets. Our LNG traders are doing an excellent job,” Gorman said.