Shell earnings: Refining margins hit record high

Shell reported adjusted net profit of $10.81 billion for the third quarter, nearly doubling the $5.43 billion earned in the same period last year. The company attributed the surge to record refining margins amid global geopolitical instability. This result exceeded the $9.92 billion expected by analysts, according to an LSEG-compiled consensus.

Indicative refining margins reached $42 per barrel, surpassing the previous peak of $28.04 per barrel set in the second quarter of 2022. The figure aligned with forecasts Shell issued earlier in the month. The company noted that strong operational performance persisted despite continued severe disruption to the global energy system, according to CEO Wael Sawan.

Shell’s financial strength was evident in its cash flow and debt management. Free cash flow rose to $16.3 billion from $10 billion a year earlier. Net debt decreased to $39.7 billion, down from $41.75 billion in the prior quarter, even after the company completed a $16.4 billion acquisition of Canadian energy firm ARC. Maurizio Carulli, an equity research analyst at Quilter Cheviot Investment Management, noted that reducing debt while closing a major deal was an impressive achievement. He predicted Shell would pursue small bolt-on acquisitions rather than a major portfolio reshaping.

The company announced a $5 billion share buyback program to be completed over the next three months, an increase from the $3 billion program in the previous quarter. Shell also lowered its 2026 capital expenditure outlook to $23 to $25 billion, down from a previous range of $24 to $26 billion. Shares listed in London rose approximately 3% in morning trade, reaching an all-time high.

The surge in profits coincided with volatile crude oil prices driven by the U.S.-Israeli war with Iran and attacks in the Strait of Hormuz. Brent Crude traded around $114 per barrel on Thursday, up from approximately $65 per barrel a year ago. A global shortfall in refining capacity, worsened by strikes on Russian refineries, has increased prices for gasoline, diesel, and jet fuel.

The Group of Seven nations agreed to release emergency diesel stocks earlier this month as rising pump prices affected consumer budgets. Tensions in the Middle East remain high, with the U.S. and Iran reportedly weighing the resumption of military strikes while Saudi Arabia faces attacks by Houthi militants. France’s TotalEnergies also reported strong results, with adjusted net income more than doubling to $9.1 billion due to historically high refining margins.