Shell and Equinor earnings exceed forecasts
Energy companies defy low prices: Rising profits thanks to trading activities and cost-cutting measures

Energy giants Shell and Equinor beat their first-quarter earnings expectations. Both companies used leverage from their trading divisions to offset lower oil and gas prices. The trend continues in the industry after Exxon Mobil, Chevron and BP also posted better-than-expected results last week. Shell and Equinor are keeping their dividends and share buybacks steady, unlike BP, whose share price slumped Tuesday after the company announced that share buybacks would be smaller than the previous quarter.
Trading operations help companies cushion the volatility of oil, gas and electricity prices by buying and selling commodities, while using financial instruments to hedge trading positions and bet on price changes. Although average selling prices for gas and oil in Europe declined in the first quarter, Equinor reported a 139% increase in profits from its chemicals and refining businesses, mainly due to better trading results and lower operating costs. As a result, the Norwegian company beat analysts' expectations with a first-quarter profit of $12 billion.
Shell also beat profit expectations, reporting total adjusted profit of $9.65 billion in the first quarter, beating the company's expectations of $8 billion. Despite an 18% decline in its integrated gas business due to lower gas prices, the company offset the decline with a 139% increase in profits from its chemicals and refining division. As a result, Shell and Equinor shares rose 2.1% and 2.7%, respectively, while the European index of oil and gas companies rose about 1%.
However, experts warn that the success of trading divisions is no guarantee that traditional oil and gas companies such as Shell and Equinor will be able to regain their market share. Chinese companies still have an advantage over foreign competitors due to government subsidies and vertically integrated supply chains. Nevertheless, the positive development in the industry is a good sign for energy trading and could help boost investor confidence in the sector.
