Shell plc (SHEL) is riding high on the back of a strong third-quarter earnings report, sending its shares soaring in premarket trading. The energy giant exceeded revenue expectations, announced a new share buyback program, and provided positive guidance for the future, fueling investor optimism.
Revenue Beats Expectations, Production Strong
Shell’s third-quarter revenue came in at a robust $71.09 billion, comfortably surpassing the consensus estimate of $61.34 billion. This strong performance was driven by healthy production across its various segments. Integrated Gas production fell slightly by 4% quarter-over-quarter (Q/Q) to 941 kboe/d, while Upstream production saw a 2% Q/Q increase to 1,811 kboe/d. Marketing sales volumes also rose by 3% Q/Q to 2,945 thousand b/d.
Earnings Decline Despite Strong Revenue
Despite the impressive revenue figures, adjusted earnings decreased by 4% Q/Q to $6.03 billion, and Adjusted EBITDA fell by 5% Q/Q to $16.01 billion. This decline was attributed to lower refining margins, a decrease in realized oil prices, and higher operating expenses.
Strong Cash Flow and Debt Reduction
Shell’s cash flow from operating activities stood at a healthy $14.68 billion in the quarter. The company also managed to reduce its net debt to $35.23 billion at the end of the second quarter, with a gearing ratio of 15.7%.
Dividend and Share Buyback Program
Shell announced a third-quarter dividend per share of $0.344, payable on December 19, 2024, to shareholders of record as of November 15, 2024. In addition, the company launched a share buyback program worth $3.5 billion, set to run for approximately three months. This program is expected to be completed before the fourth-quarter 2024 results announcement, scheduled for January 30, 2025.
Positive Guidance for the Future
Shell provided optimistic guidance for the fourth quarter and beyond. The company expects cash capital expenditure to be below $22 billion, down from its previous range of $22 billion to $25 billion. It also anticipates production at Integrated Gas of approximately 900 to 960 thousand boe/d and Upstream of about 1,750 to 1,950 thousand boe/d.
Investment Opportunities
Investors seeking exposure to Shell can consider the First Trust Exchange-Traded Fund IV FT Energy Income Partners Strategy ETF (EIPX) and VanEck Natural Resources ETF (HAP).
Share Price Performance
SHEL shares are currently up 1.11% at $66.31 in premarket trading. The strong earnings report, dividend announcement, share buyback program, and positive guidance have all contributed to this bullish sentiment.
