Oil giants Shell and Total report profits despite staggering earnings declines

Shell and Total SA announced mammoth earnings declines Thursday that reflect the pandemic's toll on energy prices and demand, but the companies nonetheless beat expectations and eked out profits.

Driving the news: Shell announced second-quarter adjusted net earnings of $638 million, an 82% decline from the same period last year.

• The big drop stems from lower prices and sales, and lower refining margins, but it was partly offset by gains in their trading divisions and cost cuts, Shell said.
• Total said its profit fell to $126 million, down 96% from the same quarter in 2019 — and like Shell, trading performance cushioned steep losses elsewhere.

The intrigue: "Although better known for their oil fields, refineries and filling stations, Shell, Total and also BP Plc run huge in-house oil trading businesses that can handle more than 25 million barrels a day of crude and products," Bloomberg reports.

Why it matters: The quarterly numbers are one marker of how COVID-19 — as well as climate policies, activist pressure and other forces — is shaking up the sector's outlook in the near- and long-term.

Yes, but: Shell's profits don't include a $16.8 billion write-down on the value of its assets, though Shell had previously warned it could have been up to $22 billion, due to downward revisions of future price forecasts.

• And Total yesterday announced a $8.1 billion write-down.

What's next: ExxonMobil and Chevron report Q2 earnings Friday before markets open.

Go deeper:

• Shell’s second-quarter profit slumps 82% on coronavirus hit to oil prices, energy demand (CNBC)
• Shell and Total escape underlying losses on strong oil trading (Financial Times)