Shell stock rises as oil giant beats first-quarter profit estimates

Shell, Europe’s largest oil and gas company, reported better-than-expected Q1 earnings on Thursday and launched a new share buyback program aimed at attracting investors.

Shell stock in London rose by 1.3% at the market opening, with its American depositary receipts also increasing by the same margin in premarket trading. Shell stock is up close to 10% year-to-date, buoyed by rising crude oil prices.

CEO Wael Sawan is actively working to narrow the valuation disparity between his company and American rivals Exxon Mobil and Chevron. His strategy focuses on highlighting the company’s operational excellence and setting more aggressive climate targets than those of its U.S. competitors. Shell has also announced a new $3.5 billion buyback program to reward shareholders and has raised its dividend.

Shell currently trades at a multiple of 8.9 times forward earnings, compared to 12 for Chevron and Exxon, which has Sawan to consider a potential U.S. listing for Shell. The CEO of French energy giant TotalEnergies recently voiced similar concerns, saying that the company’s listing may move to New York in search of a higher valuation.

Notably, unlike its American rivals, Shell has not pursued significant acquisitions over the past year to boost production or secure future resources.

“Shell delivered another quarter of strong operational and financial performance, demonstrating our continued focus on delivering more value with less emissions,” Sawan said in a statement.

Shell launches $3.5bn buyback programme after earning $7.7bn in Q1

For the first quarter of 2024, the company posted adjusted earnings of $7.7 billion — a decline from $9.7 billion the previous year but a 6% increase from the final quarter of 2023.

Shell’s adjusted earnings in Q4 2023 came in at $7.3 billion.

Earnings per share were reported at $1.20, exceeding the FactSet consensus estimate of $0.97.

The company's revenue gains were driven by effective oil and gas trading and improved margins, with total production rising 10% from the previous quarter.

Stuart Lamont, investment manager at UK-based wealth manager RBC Brewin Dolphin, was cited by CNBC as saying:

“Shell has beaten expectations by a reasonable margin, despite the impact of lower gas prices during the first quarter. Earnings are up, costs have fallen, and the oil and gas major has brought debt down too – all in all, it’s a solid set of numbers and underlines why the market, generally, remains bullish on Shell”.

“Investors were looking for reassurance on volumes and capital discipline, as these ultimately feed through to cash returns. Today’s update has delivered on both fronts, with the addition of an extension to the share buyback programme”.

Results align with broader industry trend

Shell reported a roughly 20% drop in first-quarter profits compared to the same period last year, mirroring declines across the broader energy sector.  

Last week, U.S. oil behemoths Exxon Mobil and Chevron, alongside France’s TotalEnergies and Norway’s Equinor, all announced significant year-on-year declines in first-quarter profits. These energy giants had recorded record full-year profits in 2022, following Russia’s full-scale invasion of Ukraine. However, their recent revenues have suffered due to a sharp decline in gas prices.

European spot gas prices have plummeted by more than 45% over the past year, partly due to mild winter conditions and a surplus of supplies.

Shell’s UK-based competitor, BP, is set to release its first-quarter earnings on May 7.

At the time of writing on May 2, Shell stock was last up 0.98% on the day.