ii view: lots to like at Shell as quarterly profit exceeds forecasts

Third-quarter results to 30 September

• Adjusted profit up 27% from Q2 to $5.43 billion
• Share buyback maintained at $3.5 billion
• Quarterly dividend unchanged at $0.358 per share
• Net debt down 5% from Q2 to $41.2 billion

Chief executive Wael Sawan said:

"Shell delivered another strong set of results, with clear progress across our portfolio and excellent performance in our marketing business and deepwater assets.”

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ii round-up:

Energy giant Shell (LSE:SHEL) today detailed quarterly profit that beat City forecasts, fuelled by strong production and fewer exploration write-offs.

Record production off the coast of Brazil and output at a 20-year high within what President Trump (and Shell) now call the Gulf of America, helped third-quarter adjusted profit surge 27% from the previous quarter to $5.43 billion. Many analysts had been looking for around $5 billion. Both a share buyback of $3.5 billion and a dividend payment of $0.358 per share, payable to eligible shareholders on 18 December, are unchanged from the prior quarter.  

Shares in the FTSE 100 company edged higher in early trade to a record high just above £29, having come into these latest results up 16% so far in 2025. That’s similar to rival BP (LSE:BP.) and just behind a near 18% gain for the FTSE 100 index. 

Shell’s various divisions include integrated gas, oil, chemicals, and renewable energy production. An 8% rise in Canadian Liquefied Natural Gas (LNG) volumes and reduced plant maintenance contributed to the rise in profits. 

Upstream oil and gas production improved 6% from the prior quarter hit its highest in nearly two years.

Refinery utilisation of 96% helped the downstream or marketing division achieve its second highest quarterly earnings in over a decade. 

Adjusted profit for the nine months to late September of $13.7 billion was down 10% from a year ago. The price of Brent crude is down by close to 15% year-to-date. The price of natural gas is up 5% so far in 2025. 

Shell’s net debt reduced 5% from Q2 to $41.2 billion but rose from $35.2 billion in Q3 2024.

Broker Morgan Stanley reiterated its ‘overweight’ stance post the results, highlighting Shell as a ‘top pick’. Fourth-quarter results are scheduled for 5 February. 

ii view:

Started in 1907, Shell today employs over 95,000 people across more than 70 countries. The group serves approximately one million commercial and industrial customers as well as around 33 million people daily at its refuelling outlets. In competition with Tesla Inc (NASDAQ:TSLA), public vehicle charging points now number 73,000.  

For investors, concerns about energy oversupply, sharpened by ever changing geopolitics, continue to come and go. Trade tariffs reducing demand for fuel-hungry products like cars warrants consideration. New supply coming predominately from Asia remains an overhang for the Chemicals business, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. 

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On the upside, a diversity of operations regularly allows one area of strength to counter another of weakness. Prior strategy changes, including exploring only regions where hydrocarbons have already been found, are helping contain capital expenditure and thereby assisting shareholders returns, while Shell’s estimate that the dividend could be sustained even with the oil price as low as $40 per barrel - currently over $60 – offers reassurance.

For now, and despite ongoing risks, a consensus analyst estimate of fair value above £31 per share and a forecast dividend yield near 4% offer grounds for continued optimism. 

Positives: 

• Diversity of operations
• Focus on shareholder returns

Negatives:

• Uncertain economic outlook
• The weather can raise operational challenges

The average rating of stock market analysts:

Buy