Oil companies are rewarding shareholders as energy shortages drive profits to record highs

Europe’s biggest oil companies Shell and TotalEnergies expanded share buybacks on Thursday after second-quarter earnings topped an already record-breaking previous quarter after surging prices for crude oil, gas and oil products.

The two companies together repurchased $8 billion worth of shares in the third quarter after posting their respective best quarterly earnings while keeping their dividends steady, which may disappoint some investors.

Benchmark Brent crude futures are up more than 140 percent over the past 12 months, averaging around $114 a barrel for the quarter.

High crude prices typically weigh on refining margins, but tight supplies of refined fuel supported record second-quarter profitability, with Shell’s refining margin rising to virtually $28 a barrel.

Benchmark European natural gas prices and global LNG prices averaged all-time highs during the quarter.

Fueled by a record quarterly profit of $11.5 billion, Shell will buy back $6 billion of its own stock through the end of October, it said, based on an $8.5 billion buyback program announced in the US first half was completed.

Though that beats the company’s guidance for shareholder returns of up to 30 percent cash from operations, Shell hasn’t increased its dividend from its current level of 25 cents a share, a 4 percent annual increase after a 60 percent cut during corresponds to the pandemic.

TotalEnergies, with quarterly profit up 9% to $9.8 billion, expected it to buy back $2 billion in the third quarter after buying $3 billion of its own stock in the first half of the year.

The company had already announced a 5% annual increase for its first quarterly dividend for this year to €0.69 per share and said it would maintain that level for its second interim dividend in 2022.

“(TotalEnergies) has opted to keep its buyback unchanged into (Q3), which may disappoint some investors given the current macro environment,” said RBC analyst Biraj Borkhataria.

The buybacks of Europe’s two largest oil and gas majors by market cap came the same week that Norwegian company Equinor raised its 2022 dividend and share buyback forecast by 30 percent to a total of around $13 billion.

A quick recovery in demand after the end of the pandemic lockdowns and a surge in energy prices due to the Russian invasion of Ukraine have boosted energy company profits after a two-year slump. The strong earnings storm has allowed companies to pay off debt piles that have soared during the pandemic and boost returns for shareholders.

https://www.independent.ie/business/world/oil-firms-reward-shareholders-as-energy-squeeze-boosts-profits-to-record-levels-41875314.html Oil companies are rewarding shareholders as energy shortages drive profits to record highs

Fry Electronics Team

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