Shell launches $25bn buyback as profit misses estimates

Royal Dutch Shell launched a $25bn (£19bn) share buyback as the oil producer posted a 30% increase in second-quarter profit that fell short of expectations.

Britain’s biggest oil company said it would buy back at least $25bn of shares ending in 2020 subject to debt reduction and oil prices. The FTSE 100 company will start by buying a maximum of $2bn of shares in the next three months.

Earnings for the three months to the end of June rose to $4.7bn from $3.6bn a year ago. The result was less than analysts' average estimate of $5.97bn.

Second-quarter results were driven by a near doubling of integrated gas earnings to $2.3bn from $1.17bn and more than $1bn of additional profit at the upstream business, where earnings rose to $1.46bn from $339m.

However, upstream earnings, which cover exploration and production, were less than the $2bn expected by analysts. Earnings from downstream activities such as chemicals and refining also disappointed, falling to $1.66bn from $2.53bn. Analysts had expected earnings of $2.1bn.

Shell paid dividends in shares during the oil price slump and has been considering a plan to repurchase the shares. After plunging to less than $30 a barrel in early 2016 the price of Brent crude has rallied to hover near $75 a barrel, putting Shell on a more solid footing.

The company, which bought BG Group in 2016, has sold about $30bn of assets and cut costs since the oil slump to support earnings and cut debt. Net debt was $62.2bn at the end of June, down from £68.3bn a year earlier and $66.1bn at the end of March.

Shell chief executive Ben van Beurden said: “Today we are taking another important step towards the delivery of our world-class investment case, with the launch of a $25 billion share buyback programme.

“Our financial framework remains unchanged. Our free cash flow outlook and the progress we have made to strengthen our balance sheet give us the confidence to start our share buyback programme.”

Shell's London-listed shares fell 1% to £29.65.5p at 08:18 BST.