Shell (SHEL.US) refining profits under the flames of war: Q3 profits exceeded expectations and reached the second highest in history, and quarterly repurchases increased to 5 billion US dollars
The Zhitong Finance App learned that Shell (SHEL.US) announced results for the third quarter of 2026 on October 29: non-GAAP adjusted net profit of 10.814 billion US dollars, an increase of 99% over the previous year, higher than analysts' forecasts of about US$10.33 billion. GAAP net profit attributable to shareholders was US$12.057 billion. This is the company's highest quarterly profit since the first few months after the Russia-Ukraine full-scale war began in early 2022, and the second-highest quarterly profit in its history. Along with profit, shareholder returns were also raised: the share repurchase scale was drastically increased from $3 billion to $5 billion in the fourth quarter — against the backdrop of two wars that pushed refining gross profit to the highest level in history and the downstream business recorded the strongest single-quarter performance in history, management chose to accelerate the return of this windfall to shareholders.
Two wars, one oil refining profiteer
The sharp increase in profits in this period is directly due to geography: the Iran war and the Russian-Ukrainian conflict temporarily shut down a significant portion of the world's fuel production capacity, and refineries that are still in operation are enjoying excessive profits as a result — supply gaps for refined oil products such as diesel and gasoline, which turned into huge profits for those left behind.
Financial figures confirm this logic. Shell's global indicative refining gross profit rose to an all-time high of 42 US dollars per barrel during the quarter, nearly double that of 24 US dollars in the second quarter, and far higher than 11.6 US dollars in the same period last year; the previous high was at the beginning of the 2022 Russian-Ukrainian war, at about 28 US dollars/barrel. The adjusted profit of the chemicals and products segment, which carries refining and oil trade, reached a record high of US$3,855 million in the downstream business in a single quarter — as a reference, this business totaled only about US$1.1 billion for the full year of 2025. Among them, the product sub-sector contributed about 3.8 billion US dollars, and the chemical sub-sector only about 100 million US dollars, indicating that almost all of the profits came from the refining and trade links, not the chemical boom.
It is worth mentioning that this record was not built up by “more refining”: the refinery load rate was 96% in the current quarter, but it was lower than 102% in the second quarter, and the fourth quarter guidelines fell further to 92% to 100%. High profits come from prices rather than operating rates. Shell also acknowledged in a press release that the sharp rise in refining profits was compounded by “strong operating performance” under operational disturbances such as low water levels in the Rhine River.
CEO's abacus: small but large refineries embedded in the global trading machine
Under CEO Wael Sawan (Wael Sawan), Shell has continued to shrink its refining layout over the years, concentrating the remaining refining energy into smaller, larger plants, and deeply tied to its own trade business. The value of this “production-refining-trade-shipping” integrated model was amplified during the period of extreme market turbulence: companies can not only make money from increasing price differences between crude oil and refined oil products, but also profit from price differences between different products and regions. According to HSBC estimates, Shell's trading business contributed about US$6.6 billion in profit in the first half of 2026.
One detail of the official data can be used as a footnote to the trade line: the chemical and product division's contribution to trade and optimisation (Trading and Optimisation) this quarter was actually lower than the “very strong” second quarter, mainly due to non-cash time-point effects — in other words, the $3,855 billion segment record is basically a contribution of refining gross profit itself, and normal profit on the trade side has not been fully included.
Downstream profits are also enough to backfill losses in other parts of the portfolio: Qatar's production is still affected by the Middle East conflict — according to Bloomberg's caliber, Qatar accounts for about 10% of Shell's overall oil and gas production. The production of oil and gas that can be sold during the quarter was 2.574 million barrels of oil equivalent per day, down from 2.821 million in the same period last year; despite this, operating cash flow reached US$21.043 billion (US$21,432 billion in the second quarter).
LNG: LNG Canada boosts volume, phase II production capacity doubles
The North American LNG portfolio is another beneficiary of this season: LNG import profits from Europe and Asia are at an unusually generous level. Combined with the LNG Canada project, the adjusted profit of the integrated natural gas segment was US$3,037 billion (2.7 billion in the second quarter), and the price of natural gas has risen from US$7.2 per thousand cubic feet to US$8.3. Bloomberg mentioned that Shell and partners in the Canadian project have agreed to double export production capacity this quarter — LNG Canada Phase II (Phase 2) Final Investment Decision (FID) has been implemented.
Furthermore, the ARC Resources acquisition completed on September 2 will jump from the fourth quarter: integrated natural gas production guidelines for the fourth quarter to rise to 1,080-1,180 kilobals/day (772 thousand barrels in the third quarter). This is a stepped up due to mergers and acquisitions rather than endogenous growth.
Increased returns: 5 billion repurchases, unchanged dividends, reduced capital expenditure
Shell is committed to allocating 40% to 50% of operating cash flow during the period to shareholders. Earlier this year, the company reduced quarterly repurchases to $3 billion; this time, it directly returned to $5 billion for execution over the next three months (until the release of the fourth quarter results). The third quarter dividend remained unchanged at $0.3906 per common share ($0.7812 per ADS, 1 ADS = 2 common shares); total shareholder returns for the quarter were approximately US$5.3 billion, including repurchases of $3.2 billion and cash dividends of $2.2 billion.
The balance sheet was repaired simultaneously: net debt fell from US$41.8 billion at the end of the second quarter to US$39.7 billion — net debt fell by US$2.1 billion; debt ratio fell from 18.7% to 16.6%, of which ARC acquisitions contributed 0.8 percentage points of decline. It should be noted that the net debt contains a non-cash portion of about 8 billion US dollars (which can be converted into long-term shipping leases). Excluding leases, the net debt is only 5.6 billion US dollars, and the debt ratio is 2.7%. In terms of cash flow, operating cash flow of US$21 billion and free cash flow of US$16.3 billion were obtained in the context of supply disruptions in the Middle East during the quarter.
The expenditure side is more restrained: the 2026 cash capital expenditure guidelines (including ARC) were lowered from US$24-26 billion given in the second quarter to US$23-25 billion.
There are two known variables that need to be recorded in advance in the fourth quarter: First, the termination of the Dutch fixed income pension plan is expected to result in identified non-cash losses of about US$6.4 billion (estimated as of September 30, subject to change), which will reduce IFRS profits in the fourth quarter, but will not affect adjusted caliber and cash flow; second, the refinery load rate guideline of 92% to 100% means whether high gross profit can continue, depending on when the energy refining gap caused by the war will be covered — this is the source of the current period's huge profit and its ceiling. Shell's next regular results (fourth quarter earnings report and 2027 capital market update date) are scheduled to be released on February 4, 2027.