Shell has revealed a better-than-expected 70% surge in half-year earnings thanks to its best quarterly performance for fours years, despite “severe disruption” in oil and gas markets due to the Iran war.
The FTSE 100 giant saw underlying earnings jump to 16.75 billion US dollars (£12.55 billion) after notching up a forecast-beating 9.84 billion dollars (£7.37 billion) in the three months to the end of June as its oil traders capitalised on the highly volatile cost of crude.
The second quarter result was more than double the 4.26 billion dollars (£3.19 billion) posted a year earlier and up sharply on 6.92 billion dollars (£5.18 billion) the previous quarter.
The group said underlying earnings at its chemicals and products unit – including its oil trading business – jumped to 2.88 billion dollars (£2.15 billion), up significantly from 118 million dollars (£141 million) a year ago.
This helped offset falling gas production, which tumbled by 31% due to an Iranian attack on its Qatar gas-to-liquids plant at the start of the Middle East conflict.
Chief executive Wael Sawan said: “Shell’s operational performance enabled very strong results during another quarter of severe disruption in global energy markets, as we worked hard to provide critical energy supplies and products to our customers.”
Shell has profited from trading on oil price swings, with the cost of Brent crude surging as high as 120 dollars a barrel at one stage before dropping to pre-war levels and back up past 90 dollars this week amid fraught negotiations between the US and Iran.
Its oil trading division had already seen earnings more than quadruple year on year in the first quarter.
But Shell’s Pearl GTL site in Qatar stopped production in March after being hit during attacks while LNG facilities in the country partly owned by Shell were also affected.
While its Pearl site has not been able to produce gas since the missile attack, production has been boosted group-wide thanks to a strong performance at other facilities globally.
Shell expects to take a year repairing the damaged Pearl site and getting it back up and running.
The group said it was making sure its oil refineries were working at full capacity, with record utilisation of 102%, with global refining jet volumes up 20% compared with a year earlier.
Chief financial officer Sinead Gorman said the group was “focusing on delivering for our customers” but added that it was vital to get the Strait of Hormuz back open for ships.
The Strait has effectively been blocked since the start of the war on February 28, with only a brief reopening when the US and Iran signed an interim peace deal in June, but the crucial waterway has been blocked again in recent weeks amid renewed hostilities as negotiations broke down.
There has also been disruption to the Red Sea after attacks by Houthi rebels this month, leaving only the Suez canal completely open for the movement of Gulf oil.
Ms Gorman said the industry was working hard to offset the shipping disruption, but added that “as this gets more prolonged… the levers that the industry has to pull get less”.
“We’re focused on our operational performance because that’s something we can control,” she said.
In its half-year results, Shell said it would hold share buybacks at the recently reduced rate of 3 billion dollars (£2.24 billion) a quarter in the three months to September.
Shares lifted as much as 2% in early morning trading.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “One consequence of the disruption in the Middle East is higher realised prices.
“Another is heightened volatility on which the group’s trading division thrives.
“Adding in new production in Brazil and the Gulf of America, and refineries running at full capacity has led to a very strong performance on the bottom line.”
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