Shell and TotalEnergies reported sharp falls in second-quarter profits from bumper 2022 earnings as oil and gas prices, refining margins and trading results all weakened.
Both companies missed earnings forecasts on Thursday, recording headline profit for April-June of around $5 billion each, down 56% year-on-year at Shell and 49% at TotalEnergies.
Oil and gas prices had soared in 2022 following the invasion of Ukraine by Russia, a key energy producer, sending global inflation to the highest levels in decades. Energy prices however dropped sharply this year as fears of shortages eased amid global economic challenges.
"Shell delivered strong operational performance and cash flows in the second quarter, despite a lower commodity price environment," chief executive Wael Sawan said in an earnings statement.
On his part, TotalEnergies' Chief Patrick Pouyanne said: "In a favourable but softening oil and gas environment TotalEnergies once again de livered this quarter robust results, strong cash flow, and attractive shareholder distribution."
Despite the drop in profits, caused also by lower gas sales, Shell said it would return $3 billion to shareholders and raised its dividend by 15% quarter-on-quarter, as expected.
Shell slowed the pace of its share buyback programme to $3 billion in the next three months and $2.5 billion thereafter, while TotalEnergies stuck to a flagged $2 billion for the third quarter.
Sector-wide falls
Norway's Equinor reported on Wednesday a 57% drop in second-quarter profits from a year earlier. Spain's Repsol also posted similar results on Thursday,
"The impact of the sharp falls in oil and gas prices was laid bare... and with BP results next week this is likely to be a familiar theme," Michael Hewson, chief market analyst at CMC Markets UK noted.
Gas prices had soared last year after Russia cut gas shipments to Europe while oil markets were also rocked by supply concerns.
However, natural gas prices fell sharply as European countries found new suppliers, built up reserves and experienced a mild winter.
Oil prices have also tumbled, partly on fears of falling demand as the global economy slows, with major consumer China's post-Covid recovery stumbling.
Profits remain large, however, as oil and gas firms pivot toward cleaner energy and away from fossil fuels.
The benchmark front-month Dutch gas contract last traded at 30.70 euros per megawatt hour, down from above 100 euros last year - including a spike to over 300 euros in August - and 70 euros at the start of this year.
Both Shell and TotalEnergies had flagged shrinking profit from refining crude oil into fuel and chemicals in the quarter. Shell's adjusted earnings in that business were down 78%.
TotalEnergies said European refining margins dropped due to a surge in Chinese exports and quicker-than-expected Russian crude and oil products finding global buyers after the EU imposed an embargo.
