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Shell, Total proceed buyback bonanza after record profits

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On Wednesday, Shell said the Holland Hydrogen I facility can be “Europe’s largest renewable hydrogen plant” when operations start in 2025. Shell is one among several big firms trying to lay down a marker within the sector.

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Europe’s biggest oil firms Shell and TotalEnergies prolonged share buybacks on Thursday after their second-quarter profits beat an already record-breaking previous quarter on the back of soaring crude, gas and oil product prices.

The 2 firms combined are buying back $8 billion in shares within the third quarter after recording their respective highest quarterly profits while keeping their dividends regular, which could disappoint some investors.

Benchmark Brent crude oil futures have risen greater than 140% prior to now twelve months, averaging around $114 a barrel within the quarter.

High crude prices normally weigh on refining margins, but tight refined fuel supply supported record profitability within the second quarter, with Shell’s refining margin virtually tripping to $28 a barrel. 

Benchmark European natural gas prices and global liquefied natural gas prices were on average at all-time highs within the quarter.

Boosted by a record quarterly profit of $11.5 billion, Shell is buying back $6 billion of its own shares by late October, it said on Thursday, on the back of an $8.5 billion buyback scheme finished in the primary half.

While that is in excess of the corporate’s guidance for shareholder returns of as much as 30% of money from operations, Shell didn’t raise its dividend from its current level of 25 cents a share, a 4% annual increase after a 60% cut throughout the pandemic.

TotalEnergies, with a 9% rise in quarterly profit to $9.8 billion, guided it could buy back $2 billion within the third quarter after purchasing $3 billion of its own shares in the primary half of the 12 months. 

It had already announced a 5% yearly increase for its first quarterly dividend for this 12 months to 0.69 euros per share, and said on Thursday it could keep that level for its second interim dividend of 2022.

“(TotalEnergies) has opted to take care of its buyback flat into (the third quarter), which could also be disappointing to some investors given the present macro environment,” RBC analyst Biraj Borkhataria said.

TotalEnergies’ shares dipped 2.1% and Shell’s shares were up 1.6% after the outcomes announcement, having risen about 35% and 49% respectively prior to now twelve months.

This compares with an index of European oil and gas firms gaining 1.6% in early trading.

The buybacks from Europe’s two biggest oil and gas groups by market capitalisation got here in the identical week that Norway’s Equinor raised its dividend and share buyback guidance for 2022 by 30% to a complete of around $13 billion. 

Smaller rival Repsol also announced a boosted share buyback programme on Thursday on the back of bumper profits, which doubled in the primary half.

A rapid recovery in demand following the tip of pandemic lockdowns and a surge in energy prices driven by Russia’s invasion of Ukraine have boosted profits for energy firms after a two-year slump.

The strong profit windfall has allowed firms to scale back debt piles that grew sharply throughout the pandemic in addition to boost returns to shareholders.

TotalEnergies’ debt-to-capital ratio, or gearing, fell to below 10%, or half its level a 12 months ago, from 12.5% in the primary quarter, while Shell’s dipped to 19.3% from 21.3%.

Eni, Exxon and Chevron are on account of announce results on July 29 and BP on Aug. 2.

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