The two largest oil firms in Europe, Shell, and TotalEnergies increased their share repurchase programs on Thursday after their second-quarter profits surpassed those of the prior quarter’s already-record levels thanks to rising crude, gas, and oil product prices.
Some investors may be disappointed by the $8 billion in share repurchases made by the two firms combined in the third quarter after they each posted their best quarterly profits.
Benchmark In the past 12 months, the price of Brent crude oil futures has increased by more than 140%, averaging over $114 per barrel in the third quarter.
High crude prices often have an adverse effect on refining margins, but the second quarter saw record profitability due to a shortage of processed fuel. Shell’s refining margin nearly tripled to $28 per barrel.
Benchmark In the quarter, the average price of liquefied natural gas and natural gas in Europe reached record highs.
Shell announced on Thursday that it would be repurchasing $6 billion worth of its own shares by the end of October, after finishing an $8.5 billion repurchase program in the first half, helped by a record quarterly profit of $11.5 billion.
Shell did not boost its dividend from its present level of 25 cents per share, a 4 percent annual growth following a 60 percent decrease during the pandemic, despite the fact that this exceeds the company’s guidance for shareholder payouts of up to 30 percent of cash from operations.
TotalEnergies forecast that it would repurchase $2 billion in its own shares in the third quarter after spending $3 billion on them in the first half of the year, as its quarterly profit increased by 9 percent to $9.8 billion.
It had previously declared a 5% annual rise for its first quarterly dividend for this year, which amounted to 0.69 euros per share, and on Thursday it announced that it will maintain that level for its second interim dividend of 2022.
According to RBC analyst Biraj Borkhataria, “(TotalEnergies) has chosen to continue its buyback flat into (the third quarter), which may be frustrating to certain investors given the present macro scenario.”
Following the release of the results, the shares of TotalEnergies and Shell, which had previously increased by around 35% and 49% respectively, fell by 2.1% and 1.6%, respectively in the past twelve months.
In contrast, an index of European oil and gas companies was up 1.6% in early trading.
The two largest oil and gas companies in Europe by market capitalization both announced share buybacks during the same week that Equinor of Norway increased its dividend and share repurchase forecast for 2022 by 30% to a total of about $13 billion.
On Thursday, Repsol, a smaller rival, also announced an expanded share repurchase program as a result of record profits that more than doubled in the first half.
After a two-year decline, energy businesses’ profits have increased thanks to a quick recovery in demand following the end of pandemic lockdowns and a spike in energy prices caused by Russia’s invasion of Ukraine.
The businesses have been able to lower debt loads that significantly increased during the pandemic and increase shareholder dividends thanks to the significant financial windfall.
From 12.5 percent in the first quarter, TotalEnergies’ debt-to-capital ratio, or gearing, dropped to below 10 percent, or half its level from a year earlier, while Shell’s decreased to 19.3 percent from 21.3 percent.
Eni, Exxon, and Chevron must release their results on July 29, while BP must do so on August 2.
