Shell and TotalEnergies lift buybacks as Iran war boosts refining profits

What happened

The Financial Times (FT) reported that Europe's big oil companies are handing more cash back to shareholders as the war with Iran inflates their earnings, and that Shell's boss said he does not want spare cash tempting the company to spend it. Results published on Thursday back that up. Shell's quarterly profit reached $10.81 billion, against roughly $10.33 billion expected by analysts and $5.43 billion a year earlier, Reuters said. It will repurchase $5 billion of stock in the fourth quarter. TotalEnergies posted adjusted net income of $9.1 billion, more than double last year's $4.0 billion, and committed to $2.5 billion of buybacks in each of the next two quarters.

What it means

The main driver is refining, the business of turning crude oil into diesel, gasoline and jet fuel. The conflict, now in its ninth month according to Reuters, has knocked out or disrupted plants and trade routes, so the refineries still running can charge far more for their output. Shell's refining margin, the gap between what crude costs and what the finished fuels sell for, hit a record $42 a barrel. TotalEnergies' European marker reached $33.2. For both companies that is close to four times the level of a year ago.

That windfall flowed straight into results. Shell's chemicals and products division made a record $3.86 billion, Share Talk reported, and cash flow from operations before working-capital swings rose to $21.7 billion from $12.24 billion. At TotalEnergies, refining and chemicals earned a record $3.6 billion, more than five times last year's figure, while its LNG unit made $1.9 billion. The French group said its gearing, a measure of debt relative to equity, slipped below 10%, from 13.1% three months earlier.

According to Rigzone, no Shell quarterly buyback has been this large since the second quarter of 2022. Shell shares rose as much as 3.8% in London, Rigzone reported, while TotalEnergies gained 1.8% in early trade. Others are following the same path. Spain's Repsol is starting a program worth up to 950 million euros, almost double its earlier commitments, and Italy's Eni raised its buyback last week. BP, Chevron and ExxonMobil report on Friday.

The quarter was not trouble-free. Between January and September, Shell produced 17% less oil and gas than in the same stretch of 2025, mostly because fighting cut volumes from Qatar, where its Pearl gas-to-liquids plant was damaged in March and is running at reduced output. Shell also booked an impairment of about $2 billion on its European biogas business and trimmed its 2026 spending guidance to $23 billion to $25 billion. TotalEnergies took a $1.9 billion impairment, mostly linked to offshore wind and a South Korean petrochemical stake, and Jefferies said its production missed consensus by 4%.

The bull case

Both companies beat forecasts by a wide margin and turned a supply crunch into cash they are returning rather than hoarding. Shell's operating cash flow far outpaced expectations, and RBC's Biraj Borkhataria said even a $5 billion buyback may leave it short of its 40% to 50% payout guidance for the year, which suggests room for more. TotalEnergies has cut debt below its target ahead of schedule while locking in buybacks into 2027.

The bear case

The profits rest on a war and on abnormal refining margins that could shrink quickly if supply disruptions ease. Shell itself expects its refineries to run at 92% to 100% of capacity this quarter, after 96% in the third quarter. Production losses in Qatar, large impairments on low-carbon assets and criticism from consumer groups over high energy bills are reminders that the windfall carries operational and political risks.