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Shell profits more than double to $9.8 Billion, the second highest on record as Iran war raises prices

Shell's second quarter net profit was $9.84 billion, more than doubling from the previous year. This exceeded expectations due to higher energy prices and market volatility caused by the Middle East conflict.

The British major was able to offset lower volumes due to disruptions in its Qatar operations by a combination of higher?oil prices, improved liquefied gas (LNG) trading, and better chemicals margins.

Shell's adjusted earnings (a measure of net income) were expected to be $8.92 billion by analysts, according a consensus provided by the company, up from $4.26 billion one year ago. The U.S./Israeli war against Iran has created market disruptions and volatility, which have provided opportunities for large trading companies such as Shell, BP, and TotalEnergies.

Shell's refineries ran at 102% nameplate capacity to take advantage of the high fuel prices. This, according to Shell spokesperson, "helped to increase jet fuel production by a fifth compared to last year." Shell shares were up by 0.8% at 0937 GMT, beating a flat European energy sector. Shell, despite being one of the lowest leveraged oil companies, continues to trade below its European counterparts Eni and TotalEnergies. This is due to investor concerns about the potential growth of Shell's upstream business. Citi analysts stated.

HIGHEST PROFIT EVER SINCE 2022

The second highest profits in Shell's history were achieved during the third quarter of 2012. This was when the Russian invasion of Ukraine shook global energy markets.

It reported its highest operating-cash flow, including movements of working capital, since 2022. It said that it would continue to buy back shares at a pace of $3 billion per month over the next 3 months.

Shell's integrated business in gas, which includes the largest LNG trading desk in the world, easily beat expectations with $2.7 billion. This is 55% higher than last year, despite Shell's gas production dropping 31% quarterly. The unit that houses its oil products trading desk, the chemicals and product division, has also exceeded expectations, with a jump from $118 to $2.9 billion.

Shell predicted third-quarter integrated production of 570,000-630,000 barrels equivalent per day, after 631,000 boed during the second quarter. It also forecast LNG liquefaction volume of 7.1 to?7.7 millions tons after 7.7million tons in the previous quarter. Upstream production is expected to be between 1.68 and 1.88 million boed, compared with 1.82 million boed during the second quarter. The company expects to see higher maintenance activities for its refining and upstream assets in the third-quarter. Shell's Pearl plant, a gas-to liquids facility in Qatar, was forced to stop production in March following an attack that damaged one of its two trains. Shell said that repairs would take about a year and, in the interim, production in Canada, Nigeria, and Australia helped to make up for the capacity loss.

Shell produces 550,000 barrels per day of oil-equivalent in the Middle East, and about 10% of that is linked to Qatar.

Shell's net debt fell to $41.8 billion from $52.6 at the end the first quarter. Gearing, which is the debt-to equity ratio, including leases, dropped to 18.7%, from 23.2% in the previous quarter.

Brent crude prices were around $97 per barrel during the third quarter. Meanwhile, benchmark European gas prices were about EUR46/megawatt-hour. Both are up significantly from a year ago.

(source: Reuters)