Shell Slips as Profits Plunge on Weaker Oil Prices

Royal Dutch Shell’s stock fell on Thursday as the oil major’s third-quarter profit dropped 15% due to lower oil and gas prices. The Anglo-Dutch company also warned that the timetable of its $25 billion share buyback program could be threatened by weak macroeconomic conditions and a challenging outlook.

The stock slipped 3.9% in early trading.

The back story. Oil groups have suffered in recent months as Brent crude prices have fallen 20% since April and global demand for oil and gas has slowed. Earlier this week BP’s third-quarter profits fell 40%, hurt by lower oil prices, but the company beat expectations through strong performance in its refining operations. French oil group Total also reported a 24% profit slump on Wednesday, again due to lower prices.

After a dismal second-quarter performance, expectations around Shell’s third-quarter results were already low ahead of Thursday.

Shell is also midway through a share buyback program. It has pledged to buy back $25 billion worth of shares by the end of 2020 — in an effort to reduce the share count — and has already acquired $12 billion shares since July last year. What’s new? Royal Dutch Shell’s profit fell 15% to $4.8 billion in the third quarter, led by lower oil prices and weaker chemicals margins, the company said on Thursday.

Despite the drop, profit beat low market expectations of $3.9 billion and improved on the company’s second-quarter performance. The impact of lower oil and gas prices was offset by strong oil and liquefied natural gas trading.

Shell also announced the next tranche of its share buyback program, which will see it acquire up to $2.75 billion by Jan. 27 2020. However, Ben van Beurden, Shell chief executive, warned that weak macroeconomic conditions and the challenging outlook could threaten the program’s end of 2020 completion date.

Looking ahead. The latest raft of results from the world’s biggest oil groups further clearly demonstrates the impact of lower crude prices. Despite beating profit expectations, Shell’s cautious warning over macroeconomic conditions and a “challenging outlook” has made investors jitter. Shell’s caution, coupled with BP’s delayed dividend decision as well as the weak economic background, suggests companies have a gloomy outlook for oil and gas prices next year.  Barron’s