Shell, TotalEnergies Boost Buybacks as War-Driven Energy Profits Surge

Shell and TotalEnergies reported sharply higher third-quarter profits on Thursday as soaring energy prices and near-record refining margins boosted earnings, allowing both oil majors to increase shareholder payouts despite disruptions to their production and infrastructure from the war in the Middle East.

Shell raised its quarterly share buyback programme to $5 billion from $3 billion, while TotalEnergies maintained plans to repurchase $2.5 billion of shares in the fourth quarter and announced another $2.5 billion buyback for the first quarter of 2027.

The announcements show how major European energy companies are allocating the windfall from the US-Israeli war with Iran, now in its ninth month, which has disrupted global energy supplies and reshaped oil and gas trading. Higher prices have lifted earnings across parts of the industry, while exceptionally strong refining margins have delivered an additional boost.

Shell shares rose 3.1% in early trading on Thursday, while TotalEnergies gained 0.6%. The broader European energy sector index advanced 1.2%, indicating that Shell’s stronger buyback announcement and earnings performance attracted a more pronounced initial market response.

Shell reported third-quarter net profit of $10.81 billion, beating analysts’ average estimate of $10.33 billion and almost doubling the $5.43 billion recorded a year earlier. TotalEnergies posted adjusted net income of $9.1 billion for the July-to-September period, more than twice its $4 billion profit a year earlier and above expectations of $8.3 billion.

The results underscore how the current energy shock has benefited companies with significant exposure to trading and refining. However, the gains are uneven across business lines, and Shell’s production losses, infrastructure damage and impairments illustrate why higher commodity prices do not translate into uniformly stronger operating performance.

Refining Margins Drive Earnings Beyond Oil Prices

Refining margins nearly quadrupled for both companies compared with a year earlier, reaching $42 per barrel at Shell and $33.20 per barrel at TotalEnergies. The improvement helped lift earnings to their highest levels since 2022, when Shell delivered a record $6 billion buyback programme.

Refining margins represent the difference between the value of petroleum products produced and the cost of the crude oil used to make them. They can rise sharply when fuel supplies become tight, product prices increase faster than crude costs, or disruptions create regional imbalances between supply and demand.

The latest results denote why refining performance can be as important as crude production during a period of geopolitical upheaval. While conflict can restrict access to oil and gas supplies, it can also increase the value of available refined products and create trading opportunities for companies able to move commodities between markets.

TotalEnergies’ refining and chemicals division recorded net income of $3.6 billion, more than five times the level a year earlier and twice the previous quarter’s result. Chief Executive Patrick Pouyanné said a nearly 10% increase in refining throughput, combined with strong oil trading, enabled the company to capture historically high refining margins in Europe and globally.

The company’s liquefied natural gas business also benefited from higher prices and trading activity. Income from the LNG unit reached $1.9 billion as average gas prices rose 20% compared with the previous quarter, alongside strong LNG and gas trading.

These results show that TotalEnergies’ earnings gains extended beyond a simple increase in crude prices. Higher processing volumes, stronger margins and trading opportunities all contributed, giving the company several channels through which to benefit from disrupted energy markets.

Shell also beat expectations across all its business segments. Cash flow from operations, excluding working capital movements, climbed to $21.7 billion from $12.24 billion a year earlier and exceeded analysts’ expectations of $18.18 billion.

That cash generation provides the financial capacity to fund shareholder returns, but it also needs to be assessed against the company’s capital requirements, production outlook and balance-sheet pressures. RBC analyst Biraj Borkhataria said that even with an approximately $5 billion buyback in the following quarter, Shell would likely fall short of its annual payout ratio guidance of 40% to 50%, attributing the expected shortfall to abnormal macroeconomic conditions.

But a large buyback does not necessarily mean a company is distributing cash in line with its normal financial policy. Exceptional earnings and volatile market conditions can complicate the relationship between cash generation, dividends, repurchases and investment spending.

Shell’s Returns Strengthen, But Operational Risks Remain

Shell highlighted its longer-term shareholder performance, reporting a total return of 120% since December 30, 2022, including reinvested dividends. That compared with 78% for BP, 84% for TotalEnergies, 89% for ExxonMobil and 51% for Chevron, according to Shell data.

The comparison places Shell ahead of the named competitors over the period, although total returns reflect both share-price movements and dividends rather than operating performance alone. The latest buyback increase adds to the company’s appeal for investors focused on capital distributions, but the durability of those returns will be sustained by earnings and cash flow beyond the current energy shock.

Shell’s operating figures reveal the strain beneath its strong quarterly results. Oil and gas production fell 17% in the first nine months of 2026 compared with the same period a year earlier, mainly because the war disrupted volumes from Qatar.

LNG liquefaction volumes, however, increased 12%, supported by the ramp-up of LNG Canada, partly offsetting the impact of the Qatari disruption. The divergent trends show how additional capacity in one region can help compensate for losses elsewhere, but may not fully eliminate the effects of damaged infrastructure.

Shell halted production at its Pearl gas-to-liquids plant in Qatar in March after an attack on Ras Laffan Industrial City damaged one of the facility’s two trains. The plant has since restarted at reduced output, and Shell expects repairs to take about a year.

The company also recorded $5.4 billion in non-cash increases to shipping leases, which count towards net debt. Such accounting changes can increase reported debt without representing an equivalent immediate cash outflow, but they remain relevant to assessments of leverage and the company’s financial position.

Separately, Shell booked an impairment of approximately $2 billion across its European biogas business, including assets acquired through its $2 billion purchase of Denmark-based Nature Energy in 2023. The impairment reflected lower expectations for growth in the market, highlighting the difficulty of translating investment in emerging energy businesses into the returns initially anticipated.

Shell also lowered its 2026 capital expenditure guidance to between $23 billion and $25 billion, from a previous range of $24 billion to $26 billion. The reduction could help preserve cash during a period of strong shareholder distributions, although it also underscores the need to allocate capital carefully across existing operations and longer-term energy investments.

For both companies, the immediate earnings picture is favorable. High refining margins, stronger energy prices and trading opportunities have generated substantial profits and supported billions of dollars in planned buybacks. But the source of those gains is also a warning about their durability: geopolitical disruptions can boost margins while damaging production, raising costs and increasing uncertainty.

However, the earnings do not erase investors’ concern about how the companies can sustain strong cash generation once energy markets normalize. Shell’s reduced production, repair costs and biogas impairment show that even exceptional quarterly profits do not remove operational and investment risks. TotalEnergies’ results, meanwhile, underscore the benefits of combining refining throughput with strong trading and LNG exposure.