Shell and Total post highest quarterly profit since 2022

By Shadia Nasralla, Stephanie Kelly and Dimitri Rhodes

LONDON, Oct 29 (Reuters) - Shell and TotalEnergies reported on Thursday sharply higher third-quarter profits and raised share buybacks, as war-driven energy prices and record refining margins helped both beat expectations.

Shell raised its quarterly buyback to $5 billion from $3 billion, the second-largest buyback on record, while Total reiterated plans to buy back $2.5 billion of shares in the fourth quarter and said it would buy back another $2.5 billion in the first quarter of 2027.

The shareholder distributions offer an insight into how oil majors plan to spend the profits generated by the US-Israeli war with Iran, which is in its ninth month and has disrupted global energy supplies. Energy prices have driven inflation for customers globally and increased input costs for industry.

Reflecting its higher payout, shares in Shell gained 3.2% in early trade on Thursday, while Total's rose 1.8%, compared with a broader index of European energy companies rising 1.9%.

BP, Chevron and ExxonMobil report results on Friday. Also on Thursday, Austria's OMV reported its highest quarterly operating profit since 2022.

REFINING MARGINS ARE A MAJOR SPUR

Refining margins nearly quadrupled for both Shell and Total compared with a year ago. They reached $42 a barrel and $33.2 per barrel, respectively, helping to boost earnings to the highest since 2022, when Shell delivered a record $6 billion buyback programme.

Shell posted third-quarter net profit of $10.81 billion, above analysts’ average estimate of $10.33 billion and almost double the $5.43 billion it earned a year earlier.

TotalEnergies reported adjusted net income of $9.1 billion for the July to September quarter, more than double the $4.0 billion a year earlier and above an expected $8.3 billion.

Total's refining and chemicals division posted record net income of $3.6 billion, more than five times the level of a year ago and double the previous quarter. CEO Patrick Pouyanné said a nearly 10% increase in refining throughput, along with strong oil trading, had captured historically high refining margins in Europe and worldwide.

Total's income in its LNG unit rose to $1.9 billion on average gas prices that were up 20% compared to the last quarter and strong LNG and gas trading.

The company's gearing fell to 9.1% at end-September from 13.1% at the end of the prior quarter, below its target of under 10% by the end of 2026.

Jefferies called Total's results “solid, not standout," as hydrocarbon production reached 2.5 million barrels of oil equivalent per day, missing Total's consensus by 4%, the broker said. Total also took a $1.9 billion impairment mainly tied to offshore wind and a South Korean petrochemical stake.

SHELL'S SHAREHOLDER RETURNS STAND OUT

Since December 30, 2022, Shell has delivered a 120% total shareholder return, including reinvested dividends, ahead of BP’s 78%, TotalEnergies’ 84%, ExxonMobil’s 89% and Chevron’s 51%, according to Shell data.

Shell beat expectations across all its segments.

Its cash flow from operations, excluding working capital, rose to $21.7 billion from $12.24 billion a year earlier and beat expectations of $18.18 billion. RBC analyst Biraj Borkhataria said even with a roughly $5 billion buyback next quarter, Shell will likely miss its 40% to 50% payout ratio guidance for the year, a shortfall he attributed to abnormal macro conditions.

Shell’s oil and gas output fell 17% in the first nine months of 2026 from a year earlier, mainly because war in the Middle East reduced volumes from Qatar. LNG liquefaction volumes rose 12%, driven by the ramp-up at LNG Canada and partly offset by the Qatari disruption.

Shell halted production at its Pearl gas-to-liquids plant in Qatar in March after an attack on Ras Laffan Industrial City damaged one of its two trains. It has has restarted the plant but at reduced output and says repairs could take about a year.

Shell recorded $5.4 billion in non-cash increases to shipping leases, which count toward net debt. Shell booked an impairment of around $2 billion across its European biogas business, which includes assets from its 2023 $2 billion acquisition of Denmark-based Nature Energy, due to lowered expectations of growth in the market.

Shell lowered its capital expenditure guidance for 2026 to $23 billion to $25 billion from $24 billion to $26 billion.

(Reporting by Shadia Nasralla and Stephanie Kelly in London and Dimitri Rhodes in Gdansk. Editing by Jan Harvey, Mark Potter and Barbara Lewis)