Shell Earnings Beat Views as Gas Trading Offsets Low Oil Prices — 3rd Update

By Christian Moess Laursen

Shell's earnings topped market views thanks to its gas and upstream divisions, partly offsetting low oil prices and weak refining margins that have hit energy majors' results over the third quarter.

The British energy giant's adjusted earnings fell slightly on year to $6.03 billion, but exceeded consensus estimates of $5.36 billion.

The beat was driven by higher volumes from Shell's integrated gas unit and maintenance work completed ahead of time at its upstream unit, helping both segments significantly outperform market expectations. Shell is the world's top liquefied natural-gas trader.

This comes amid a weak macroeconomic environment where slumping refining demand and low oil prices have pressured profits of the world's top oil and gas companies in the past quarter. BP booked its lowest profit in nearly four years, while TotalEnergies hit a three-year low.

Earnings from Shell's chemicals and products segment dropped to less than a third of the year-earlier result on weaker refining and trading margins. However, this was offset by higher mobility margins and seasonally higher volumes in the marketing division, helping Shell's downstream result beat market views by 12%, according to a company-provided forecast.

Analysts said the results show Shell's operational strength, highlighting its resilience despite a weak macro environment and its solid financial position.

"The business has put itself in a strong position to weather any volatility in commodity prices and take advantage of competitor struggles," Maurizio Carulli, analyst at Quilter Cheviot, said in a market comment.

Under Chief Executive Wael Sawan, who took the reins at the start of last year, Shell has vowed to grow its core gas unit while cutting costs and spending as well as trimming operations to fund shareholder returns and low-carbon energy investments.

On Thursday, it lowered its capital-expenditure guidance for the year to below $22 billion from $22 billion-$25 billion previously. Spending had reached a $40.145 billion peak in 2013.

Its capital discipline has helped Shell improve its balance sheet materially as its net debt fell to $35.23 billion, its lowest since 2015.

This, along with the overall result and a $2.7 billion working-capital inflow, drove a 19% increase to Shell's cash flow from operations to $14.68 billion, beating consensus forecasts of $12.60 billion. The metric is closely watched as its supports Shell's buyback pledge.

Europe's biggest oil and gas company by market value declared a quarterly dividend of 34.40 cents and said it would buy back $3.5 billion worth of shares during the fourth quarter, in line with its previous guidance. This would take total buybacks for the year so far to $14 billion.

Shell has been highlighted by analysts as one of the few European energy majors with a healthy enough balance sheet to sustain its current promises of lofty returns into next year.

The cost cuts, along with capital discipline, bode well for shareholder returns in the future, Berenberg analysts said in a note last month.

Shares in London rose 1.2% at 25.20 pounds in late morning trade, narrowing the year-to-date fall to 2%.

Write to Christian Moess Laursen at christian.moess@wsj.com