Shell beat earnings estimates while posting record profits for the second consecutive quarter. Stock rose in overnight trading.
Shell Earnings
Estimates: Wall Street predicted EPS of $2.88 on $93.1 billion in sales in the second-quarter.
Earnings: Shell reported earning $3.08 per share, a 117% increase. Revenue in the second-quarter grew 65% to $100 billion. The company reported adjusted earnings of $11.5 billion, breaking the $9.1 billion Q1 record.
"With volatile energy markets and the ongoing need for action to tackle climate change, 2022 continues to present huge challenges for consumers, governments, and companies alike," CEO Ben van Beurden said in a statement.
SHEL gained 2.7% closing at 51.42 Wednesday. Beurden added that Shell is increasing shareholder distributions through a $6 billion share buyback program which is expected to be completed by the third-quarter.
Acquisitions
Shell Midstream Partners stock rallied more than 10% Tuesday after SHEL announced Monday that its U.S. subsidiary, Shell USA, will acquire Shell Midstream in a buyout worth $1.96 billion.
Shell USA agreed to acquire all remaining common units representing limited partner interests in SHLX. The price is $15.85 per public common unit in cash. SHEL already owns 269.5 million common units of Shell Midstream Partners, or about 68% of the company. The companies expect the transaction to close in the fourth-quarter of 2022. SHLX pays a cash distribution of $1.20 per share, providing an annual yield of 8.3%.
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Shell Midstream Partners operates pipelines and terminals to transport onshore and offshore oil production to the U.S. Gulf Coast and Midwest refining markets. It also owns interests in entities that own natural gas and refinery gas pipelines that transport offshore natural gas and deliver refinery gas to chemical sites along the Gulf Coast.
U.S. natural gas prices pared gains to just above 2%, trading a bit below $9 per million British thermal units Tuesday. Prices briefly hit $9.70 Tuesday morning, a high not seen since 2008. U.S. crude oil's price dropped 1% to around $95.50.
In February, Shell had made a preliminary offer to buy SHLX for $12.89 per common unit. SHEL said at the time that the transaction "simplifies the governance of SHLX assets, reduces costs and provides flexibility to optimize the pipeline portfolio."
In 2014, Shell used the SHLX IPO as a means to spin out its midstream assets, and to acquire and develop additional infrastructure. At the time, SHEL was the first major oil company to make its midstream business its own publicly traded entity, according to the Wall Street Journal. Smaller operators had been using the strategy for decades.
SHLX Stock
Shell Midstream Partners stock rose 10.3% during market trading Tuesday to trade above 16. Volume soared 2,500% as the stock punched above its 50-day moving average. That created a breakaway gap buying opportunity, above a flat base buy point at 14.79.
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Shell Midstream Partners has a 75 Composite Rating, out of 99. It has a Relative Strength Rating of 93, an exclusive IBD Stock Checkup gauge for share-price movement with a 1 to 99 score. The rating shows how a stock's performance over the last 52 weeks holds up against all the other stocks in IBD's database. The stock's EPS Rating is a mild 48.
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