TotalEnergies, Shell Post Bumper Profits, LNG Business Diverges

Europe’s two largest energy companies Shell Plc and TotalEnergies SE reported profits of more than $9 billion in the third quarter, though Shell’s LNG division struggled to capture the benefits of high fuel prices.

The strong earnings were likely to intensify calls in Britain and the EU for further windfall taxes on energy companies to help households cope with gas and power bills.

LNG prices have soared this year as Moscow progressively cut piped natural gas supplies to Europe, which heavily depended on Russian imports.

Western sanctions on Russia, which is among the world's leading oil and gas producers, in response to its invasion of Ukraine in February, helped to drive European gas prices to an all-time high in August.

They have fallen heavily in recent weeks as Europe has filled gas storage and temperatures have been unusually mild, but prices are still higher than a year ago.

The world’s biggest LNG trader Shell missed some of the benefit of the price rise after a fall in production following strikes at Australia’s Prelude site. It also said its trading was hit by “substantial differences between paper and physical realizations in a volatile and dislocated market.”

Its headline profit in its integrated gas unit was down almost 40% on the previous quarter.

Overall profit of $9.5 billion was slightly below last quarter’s record. Shell still decided to increase its dividend by 15% as it prepares for Wael Sawan to take the helm from Ben van Beurden next year.

TotalEnergies LNG, renewables and power division reported a record income of $3.6 billion in the quarter, up $1.1 billion from the second quarter and more than twice last year’s, driven by a 50% rise in LNG prices and a “strong” performance of its LNG trading division.

This came even as its LNG sales volumes fell 10% on the quarter due to outages at the large U.S. Freeport plant and elsewhere. Overall, TotalEnergies made a record quarterly profit of nearly $10 billion.

TotalEnergies more than halved its debt-to-capital, or gearing, ratio to 4%, underlining its comparatively strong balance sheet. Gearing at Shell, which is on track for a record year of profits, increased slightly to 20.3%.

Despite their hefty profits, shares of Shell and its European peers TotalEnergies and BP Plc have so far this year significantly under-performed their larger U.S. rivals Exxon Mobil Corp. and Chevron Corp. whose business models are weighted much more towards fossil fuels than renewables.

While Shell and BP's shares have gained around 40%, Exxon Mobil is up 75% and Chevron Corp. over 50%.

Shares in Norway’s Equinor have also gained 54%, spurred by the gas price surge.

Spain's Repsol on Oct. 27 reported a doubling of its profit to 1.48 billion euros (US$1.49 billion).

(US$1 = 0.9938 euros)