The British oil and gas giant Shell reported a decline in profit for the first half of the year due to significant depreciation and accounting charges, alongside pressured margins in refining, production, and hydrocarbon sales.
Profit and Revenue Decline
Shell’s net profit attributable to the group dropped by 8% year-on-year in the first half, amounting to $10.9 billion. Revenue also saw a decrease of 9%, standing at $149.8 billion, as per the company’s statement.
Operational Cost Reductions and Production Increases
Despite the pressure on margins, the results were bolstered by a reduction in operational expenses and an increase in hydrocarbon production volumes.
Depreciation and Accounting Adjustments
The group incurred depreciation charges and accounting adjustments, particularly related to derivative contracts, which negatively impacted the results by $3.3 billion during the period. This figure is higher than the exceptional items included in the first-half results of 2023.
Anticipated Depreciations
In July, Shell had indicated expected write-downs of up to $2 billion in the second quarter, linked mainly to a massive biofuels project in the Netherlands, whose construction was recently halted.
Previous Performance and Market Challenges
Shell reported a significant year-on-year profit decline in the first quarter due to reduced exploration and production revenues, following a profit drop in 2023.
The 2023 decline was driven by falling hydrocarbon prices, which had previously peaked with the onset of the Ukraine war.
Comparative Performance: BP
The other British major, BP, announced on Tuesday a 79% drop in first-half profit, similarly suffering from asset write-downs and declining refining margins.
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