Shell (SHEL) Tops Q3 Estimates as Refining Margins Hit a Record

Shell (SHEL) reported third-quarter adjusted earnings of $10.81 billion, nearly double the $5.43 billion of a year earlier, as record refining margins lifted its fuel business. That beat the $10.33 billion average of an analyst poll compiled by the company, Reuters reported. Shell’s US-listed shares rose 2.4% on Thursday to close at $107.67, after the results came out in London before the US open.

What stood out

Refining did most of the work. Shell’s indicative refining margin, a rough measure of what it earns turning a barrel of crude into fuel, hit a record $42 a barrel, up from $24 in the second quarter and $11.60 a year earlier, Reuters and CNBC reported. Supplies have been squeezed by the war in the Middle East, which has pushed up oil and fuel prices.

Both outlets said it was Shell’s biggest quarterly profit since 2022. Integrated gas, Shell’s liquefied natural gas business, also earned more, while upstream earnings, from pumping oil and gas, fell from the second quarter, the release showed. Shell completed its purchase of Canada’s ARC Resources on 2 September.

“Shell’s relentless focus on operational performance enabled very strong results in a quarter with continued severe disruption to the global energy system,” Chief Executive Wael Sawan said in the results release.

The cash backed up the profit. Cash flow from operations was $21.0 billion, close to the second quarter’s $21.4 billion and well above the $12.2 billion of a year ago. Net debt fell by $2.1 billion in the quarter, and is down from $52.6 billion at the end of March.

The outlook

Shell will buy back $5 billion of its shares before it reports fourth-quarter results, up from $3 billion in the previous round, Reuters and CNBC reported. It trimmed its 2026 cash spending plan to $23 billion to $25 billion, from $24 billion to $26 billion. The company said its policy of handing 40% to 50% of cash flow from operations back to shareholders over the cycle is unchanged.

What the market is telling us

The gain left Shell’s US shares 0.5% below their 52-week closing high of $108.18 from 23 October, and up 46.5% this year. They moved 5% or more on only 1 of the last 252 sessions.

Our take

This was a clean beat, and the bigger buyback shows Shell is turning the windfall into cash for shareholders rather than new spending. The catch is that a record refining margin depends on a supply squeeze that may not last. Next quarter, we’d watch how much of the $42 margin holds up and whether the gas business keeps growing with ARC Resources fully on board.