Shell profit above, TotalEnergies in line with expectations amid lower prices

By Stephanie Kelly, Shadia Nasralla and America Hernandez

LONDON/PARIS (Reuters) -Shell and TotalEnergies posted quarterly profit falls of 10% and 2%, respectively, on Thursday, dragged down by lower oil prices, though Shell beat expectations helped by better trading results in its huge gas division.

While Shell, the world’s largest liquefied natural gas trader, is keeping its $3.5 billion buyback pace, No. 2 LNG player TotalEnergies said it would scale back in the fourth quarter, under pressure to keep a lid on its debt.

Shell’s buybacks have topped $3 billion for the last 16 quarters. By the end of the year, it will have bought back more than a quarter of its shares in four years. 

The buybacks, together with $2.1 billion in dividends, take Shell’s shareholder payouts over the last four quarters to 48% of operating cash flow, within the company’s 40% to 50% target range.

Shell’s adjusted earnings, its definition of net profit, fell to $5.4 billion in the quarter to September 30 but beat the $5.09 billion expected by analysts in a poll provided by the company.

TOTALENERGIES PROFIT HELPED BY UPSTREAM, REFINING MARGINS

French major TotalEnergies’s adjusted net income slipped to $4.0 billion from $4.1 billion a year earlier.

That met analysts’ expectations according to a consensus compiled by LSEG, as higher upstream production and improved crude refining margins partially offset lower oil prices.  

Total’s downstream profit jumped by 76%. European refining margins have soared more than 300% from the third quarter last year, buoyed by an EU ban on fuel imports made from Russian oil.  

Recent U.S. sanctions on major Russian producers Lukoil and Rosneft would push refining margins and oil prices higher, CEO Patrick Pouyanne told analysts on a call. He said he expects European refining margins closer to $100 per ton in the fourth quarter from $63 and oil prices above $65 per barrel.

Meanwhile, Shell CEO Wael Sawan said there was a credible scenario for oil oversupply in 2026.

The LNG market likely will be balanced next year, Sawan also said on an earnings call. Longer-term, Shell’s finance chief Sinead Gorman said the exact timing of new LNG projects starting up around the world is in flux, which could create uncertainty about supply.

TotalEnergies’ shares closed almost 1% lower, while Shell was little changed on the day. The index of European energy companies was also roughly flat.

SHELL’S GAS, UPSTREAM BUSINESSES BEAT EXPECTATIONS

Shell reported quarterly cash flow from operations of $12.2 billion, down from $14.7 billion a year earlier. 

Profits at its integrated gas unit and oil-focused upstream division both beat expectations but were down from last year.

Shell’s gearing, or debt to equity ratio including leases, dipped slightly on the previous quarter but rose to around 19% from 16% last year. 

TotalEnergies’ gearing was down slightly quarter on quarter to 17.3% but up 18% from last year.

Brent futures averaged around $68 per barrel in the quarter, down from about $78 a year earlier, according to LSEG data and Reuters calculations. 

The benchmark Dutch front-month gas contract at the TTF hub averaged 33.04 euros per megawatt-hour in the quarter, down from 35.6 euros per MWh.  

(Reporting by Stephanie Kelly, Shadia Nasralla and America Hernandez; editing by Jason Neely, Kirsten Donovan)