Shell profit more than doubles to $9.8 billion, second-highest on record, as Iran war lifts prices

By Stephanie Kelly and Shadia Nasralla

LONDON, July 30 (Reuters) - Shell's net profit more than doubled from last year to $9.84 billion in the second quarter, beating expectations, helped by higher energy prices and increased market volatility during the Middle East conflict.

Higher oil and gas prices, stronger liquefied natural gas (LNG) and oil trading and improved chemicals margins helped support the British major's earnings, offsetting lower volumes caused by disruptions to its Qatar operations.

Analysts had expected adjusted earnings, Shell's measure of net profit, of $8.92 billion, according to a company-provided consensus, compared with $4.26 billion a year earlier.

Market disruptions and volatility caused by the U.S.-Israeli war with Iran have created opportunities for the large trading businesses operated by companies such as Shell, BP and TotalEnergies.

Shell's refineries were running at 102% of their nameplate capacity during the quarter to make the most of high fuel prices, which helped increase production of jet fuel by a fifth from a year ago, according to a Shell spokesperson.

Shares in Shell were up 0.8% by 0937 GMT, outperforming a flat broader European energy sector.

While it remains one of the least leveraged oil majors, Shell continues to trade at a discount to European peers Eni and TotalEnergies, reflecting investor concerns about the growth potential of its upstream business, Citi analysts said.

HIGHEST PROFIT SINCE 2022

Profits in the quarter were Shell's second-highest on record, surpassed only by the second quarter of 2022, when Russia's invasion of Ukraine upended global energy markets.

It reported its highest operating cash flow, including working-capital movements, since 2022. Still, it said it would maintain the pace of its share buyback programme at $3 billion over the next three months.

Profits from Shell's integrated gas business, which includes the world's biggest LNG trading desk, comfortably beat expectations at $2.7 billion, 55% above last year's and despite its gas production falling 31% quarter-on-quarter.

Its chemicals and products unit, home to its oil product trading desk, also outperformed expectations, jumping to $2.9 billion from $118 million a year ago.

Shell forecast third-quarter integrated gas production of 570,000 to 630,000 barrels of oil equivalent per day after 631,000 boed in the second quarter, and LNG liquefaction volumes of 7.1 million to 7.7 million tons after 7.7 million tons in the second quarter. It expects upstream production of 1.68 million to 1.88 million boed following 1.82 million boed in the second quarter.

It expects higher maintenance activity for its upstream and refining assets in the third quarter.

Production at Shell's Pearl gas-to-liquids plant in Qatar was halted in March after an attack damaged one of the facility's two trains. Shell has said repairs could take about a year and in the meantime, output in Canada, Nigeria and Australia was helping make up the loss in capacity.

The Middle East accounts for about 20% of Shell's oil and gas production, or 550,000 barrels of oil equivalent per day, with about 10% linked to Qatar.

Shell's net debt dropped to $41.8 billion, from $52.6 billion at the end of the first quarter. Its gearing, or debt-to-equity ratio including leases, fell to 18.7% from 23.2% last quarter.

Brent crude averaged about $97 a barrel in the quarter, while benchmark European gas prices averaged about €46 per megawatt-hour, both up sharply from a year earlier.

(Reporting by Stephanie Kelly and Shadia Nasralla, Editing by Louise Heavens and Tomasz Janowski)