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Earnings dip for Shell, TotalEnergies as oil and gas rates temper post thriving 2022.

Oil and gas giants Shell and TotalEnergies have experienced a significant drop in profits during the second quarter, following a highly profitable year in 2022. This fall in earnings results from a downward shift in oil and gas prices, reduced refining margins, and less impressive trading results.

After a surge in oil and gas prices post-Russia’s incursion into Ukraine, energy prices have seen a drastic decline this year, alleviating fears of a shortage in the midst of global economic turmoil.

The earnings report released on Thursday by both companies revealed that they missed their projected earnings. They registered profits in the region of $5 billion each for the period from April to June, marking a year-on-year decrease of 56% for Shell and 49% for TotalEnergies. Nonetheless, Shell’s performance echoed that of 2021, while TotalEnergies exceeded its results prior to the Ukraine conflict.

Shell’s stock fell by 1.9% at 0755 GMT, whereas TotalEnergies saw a modest drop of 0.4%, reflecting a 1% downturn in the European oil and gas industry index.

Shell has dialed down its share repurchase initiative to $3 billion for the next quarter, and $2.5 billion subsequently, while TotalEnergies maintained its plan for a $2 billion buyback in the third quarter.

Shell has also increased its quarterly dividend by 15%, as projected. Shell’s CEO, Wael Sawan, affirmed the company’s robust operational execution, despite a slump in commodity prices. On the other hand, Patrick Pouyanne, the chief of TotalEnergies, noted a less buoyant oil and gas landscape.

Norway’s Equinor revealed a 57% slump in second-quarter profits from the previous year. The average price for benchmark Brent crude stood at $80 per barrel in the second quarter of 2023, in contrast to $110 a year ago. The prices for Liquefied Natural Gas (LNG), a vital product for both companies, plummeted to $11.75 per million British thermal units (mmBtu) from roughly $33.

TotalEnergies predicts LNG prices will hover around $9 to $10 mmBtu in the upcoming quarter, but expects a surge to $15 mmBtu over the winter due to demand from Asia and Europe.

The benchmark Dutch gas contract for the nearest month traded at 30.70 euros per megawatt-hour, a sharp decrease from well above 100 euros last year, including a peak of over 300 euros in August and 70 euros at the commencement of this year.

Shell and TotalEnergies both warned of a contraction in profit from transforming crude oil into fuel and chemicals during this quarter. Shell’s adjusted earnings in this sector saw a decrease of 78%.

TotalEnergies announced that European refining margins suffered due to a spike in exports from China and the unexpected speedy entry of Russian crude and oil products into the global market following the EU’s imposition of an embargo.

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