Shell announces $25 billion share buyback program as quarterly profits miss estimates 

  • Oil giant Royal Dutch Shell posted a 30 percent rise in net profit in the second quarter of 2018.
  • Net income attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, and excluding identified items, came in at $4.69 billion.
  • Shell announced a $25 billion share buyback program.

Oil giant Royal Dutch Shell posted a 30 percent increase in net profit in the second quarter of 2018 and announced a $25 billion share buyback program.

Net income attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, and excluding identified items, came in at $4.69 billion, up from $3.6 billion seen in the same quarter a year ago.

However, the earnings fell short of an company-provided analyst consensus of $5.967 billion, according to Reuters. Shares fell 1.5 percent in early trade on Thursday.

Here are the key second-quarter metrics:

  • Net income attributable to shareholders (on a current cost of supplies basis and excluding identified items) came in at $4.69 billion, versus $5.4 billion in the previous quarter.
  • The Anglo-Dutch oil company maintained its quarterly dividend at 47 cents.
  • Of the 2016-2018 $30 billion divestment program, $27 billion is complete with more than $7 billion announced or in advanced progress, the company said.

The company said the earnings "reflected increased contributions from integrated gas and upstream, partly offset by lower earnings in downstream." Upstream refers to the exploration and production of oil, whereas downstream relates mainly to the refining process.

Shell also announced that it would start a share buyback program "of at least $25 billion in the period 2018-2020, subject to further progress with debt reduction and oil price conditions."

Speaking to CNBC Thursday, Shell CEO Ben van Beurden hailed the "solid" earnings and said the company had delivered on a number of fronts.

"We have delivered on the synergies, on cost takeout, on capital discipline, we're delivering on growth and we've protected the dividend ... And now, indeed, our cash flow and the paydown of our debt has brought us to the point where we are confident to launch a $25 billion share buyback program," he told CNBC's "Squawk Box Europe."

"Our earnings are solid. If you look at integrated gas (it was) a very good quarter and twice as good as the same quarter last year. Upstream (saw) a good, solid quarter — four times as good as the same quarter last year. Downstream is lower ... And now we see a tougher environment for both refining and trading. We saw some higher costs in downstream as well as a result of a heavier maintenance program that we had."

Gas is flared off from a flame boom aboard DCOR LLC's Edith offshore oil and gas platform in the Beta Field off the coast of Long Beach, California.
Tim Rue | Bloomberg | Getty Images
Gas is flared off from a flame boom aboard DCOR LLC's Edith offshore oil and gas platform in the Beta Field off the coast of Long Beach, California.

Van Beurden said in the earnings statement that the share buyback program was "another important step towards the delivery of our world-class investment case."

"This move complements the progress we have made since the completion of the BG acquisition in 2016, to reshape our portfolio through a $30 billion divestment program and new projects, to reduce net debt, and to turn off the scrip dividend."