Shell $SHEL beat first-quarter earnings expectations on Thursday as the Iran war pushed oil prices higher and drove a surge in trading profits, though the company cut its stock buyback and warned that production losses in the Middle East will weigh on output in the coming months.
First-quarter adjusted earnings of $6.92 billion cleared the $6.1 billion median analyst estimate compiled by Bloomberg by a wide margin and were more than twice the $3.26 billion Shell recorded in the fourth quarter of 2025. A company-provided consensus, cited by CNBC, had set the bar at $6.36 billion. Shell reported adjusted earnings of $5.58 billion over the same period a year ago.
The gains were driven in part by oil traders capitalizing on volatile markets. Within the chemicals and products segment, where Shell's trading desk sits, results swung from a $66 million loss in the prior quarter to a $1.925 billion profit, according to Marketscreener. The upstream segment also benefited, with realized liquids prices climbing to $72 per barrel from $59 per barrel in the fourth quarter of 2025, the company said.
Since fighting started on Feb. 28, crude prices have surged roughly 40%. Passage through the Strait of Hormuz has been thrown into severe disorder by the fighting — a situation the International Energy Agency has called the gravest threat to global energy security ever recorded.
The war has also hurt Shell's production. Qatar-based assets, among them the Pearl gas-to-liquids facility, have been damaged or taken offline, cutting roughly 10% from the company's total output. A missile strike in March put one of Pearl's two processing trains out of action; restoring it to service is projected to require approximately twelve months. CFO Sinead Gorman indicated that even after the Strait of Hormuz becomes safe for ships to transit, it would still be several weeks before Qatar output flows again.
Integrated gas output is projected to land between 580,000 and 640,000 barrels of oil equivalent per day in the second quarter, a steep drop from the 909,000 barrels recorded in the first three months of the year. The company said the Q2 volume outlook reflects the expected impact of the Middle East conflict.
Shell cut its quarterly share buyback to $3 billion from $3.5 billion, and raised its interim dividend 5% to $0.3906 per share. Speaking to journalists on a Thursday call, Gorman framed the smaller buyback as a deliberate shift of resources toward strengthening the balance sheet, according to Bloomberg. CEO Wael Sawan said in a statement that the move was "consistent with our value driven capital allocation philosophy" and in line with the company's existing policy of distributing 40% to 50% of cash flow from operations to shareholders.
Net debt rose to $52.6 billion from $45.7 billion at the end of 2025, which Shell attributed to a working capital build tied to rising commodity prices. The company recorded a working capital outflow of $11.2 billion in the quarter.
Annual capital spending guidance was revised upward to a range of $24 billion to $26 billion from the prior $20 billion to $22 billion forecast, with roughly $4 billion of that increase attributable to the pending ARC Resources deal. Shell has put the transaction's total value, net debt and leases included, at $16.4 billion, and said closing it would bring an additional 370,000 barrels of oil equivalent per day into its production base.
Shell stock fell 2% on Thursday.