TotalEnergies and Shell make big profits, with divergent results in LNG business

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Europe’s two largest energy companies, Shell and TotalEnergies posted profits of more than $9 billion in the third quarter, although Shell’s liquefied natural gas division struggled to reap the benefits of high fuel prices.

These benefits are likely to intensify calls in Britain and the European Union for more taxes on energy companies to help households cope with gas and electricity bills.

Liquefied natural gas (LNG) prices have soared this year as Moscow progressively cut natural gas supplies by pipeline to Europe, which relied heavily on Russian imports.

Western sanctions imposed on Russia, which is among the main producers of petroleum and world gas, in response to its invasion of Ukraine in February, helped lift gas prices in Europe to an all-time high in August.

In recent weeks they have dropped a lot, as Europe has filled gas tanks and temperatures have been unusually subdued, but prices are still higher than a year ago.

The world’s largest LNG operator, Shell, lost some of the benefits of the price hike following a drop in production over strikes at Australia’s Prelude plant. It also said its operations were affected by “substantial differences between paper and reality in a volatile and dislocated market.”

Its core profit at its integrated gas unit was down nearly 40% from the previous quarter.

Global profit of $9.5 billion was slightly lower than the previous quarter’s record. Still, Shell decided to increase its dividend by 15% as it prepares for Wael Sawan to take the helm of Ben van Beurden next year.

TotalEnergies’ LNG, renewables and electricity division posted record profits of $3.6 billion in the quarter, up $1.1 billion from the second quarter and more than doubling last year, thanks to a 50% increase in LNG prices and “strong” results from its LNG trading division.

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This came despite its LNG sales volumes falling 10% in the quarter, due to disruptions at the large U.S. Freeport plant and elsewhere. Overall, TotalEnergies posted a record quarterly profit of nearly $10 billion.

TotalEnergies more than halved (4%) its debt-to-equity ratio, or leverage, underscoring the strength of its balance sheet. Shell’s leverage, which is on track for a record year of profits, rose slightly to 20.3%.

Despite their substantial profits, the shares of Shell and its European counterparts TotalEnergies and BP have performed well below those of their large US competitors Exxon Mobil and Chevron, whose business models lean much more towards fossil fuels than renewables.

While shares of Shell and BP have gained about 40%, Exxon is up 75% and Chevron is up more than 50%.

Shares of Norway’s Equinor are also up 54%, driven by rising gas prices.

Spain’s Repsol said Thursday it doubled its profit in the third quarter to 1.48 billion euros ($1.49 billion).

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