Shell lifts buyback to US$5 billion as refining windfall grows

SHELL boosted its share buyback to one of the highest levels in its history, returning more of a wartime refining windfall to investors as disruptions across the Middle East and Russia squeeze global fuel supplies.

The London-based major will repurchase US$5 billion of shares in the fourth quarter, up from US$3 billion previously, after profits climbed to their highest since the aftermath of Russia’s full-scale invasion of Ukraine.

Many of Europe’s biggest oil companies are for now channeling booming refining profits back to shareholders rather than chasing growth. 

TotalEnergies SE, which also reported sharply higher earnings on Thursday (Oct 29), had already pledged up to US$2.5 billion of repurchases for the fourth quarter and said it will maintain the same pace in the first three months of next year.

Spain’s Repsol SA, meanwhile, is starting a programme of as much as 950 million euros, almost double its prior commitments. Italy’s Eni SpA also announced an increased buyback last week.

The payouts are being fuelled by an extraordinary squeeze on the world’s capacity to turn crude oil into diesel, petrol and jet fuel. Wars involving Iran and Russia have knocked out or disrupted refineries and trade routes, handing outsized profits to the plants that remain operational.

Shell, Europe’s largest oil company, has been among the biggest beneficiaries. Its refining margin surged to a record US$42 a barrel during the quarter, while earnings from its chemicals and products division reached an all-time high.

The windfall helped push Shell’s adjusted net income to US$10.8 billion, above analyst expectations, even as disruption continued to weigh on production in Qatar.

Shell’s shares rose as much as 3.6 per cent in London, leading the sector higher. 

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The company said its refineries will run at between 92 per cent and 100 per cent of capacity in the final three months of this year. That compares with utilisation rates of 102 per cent and 96 per cent, historically strong levels, in the second and third quarters respectively.

For now, Shell’s buyback puts it on par with sector-leader ExxonMobil, which plans US$20 billion of repurchases this year.

Shell’s buyback is the highest since the second quarter of 2022. The only other quarter that was bigger was in 2021, when the major announced the distribution some of the proceeds of a sale of assets in the Permian Basin. BLOOMBERG