Europe's oil companies with huge profits

European oil majors reported massive third-quarter profits on Thursday, driven by historically high refining margins and elevated crude prices stemming from the ongoing conflict in the Middle East. Shell, TotalEnergies, Repsol, and Austria’s OMV all posted significant financial gains, with several companies announcing substantial share buyback programs. The surge in earnings has renewed calls for windfall taxes on energy firms. OMV, which is partially state-owned, announced that its cash cost savings (CCS) rose 68 percent year-on-year to 2.1 billion euros. Revenue climbed 43 percent to nearly nine billion euros, while earnings per share nearly doubled to 3.14 euros. The company attributed the jump in its energy division primarily to positive market effects worth 515 million euros, reflecting significantly higher realized gas and oil prices. Although lower sales volumes resulted from delayed oil and gas production in the Middle East, these were more than offset by price increases. In the fuel segment, operating results surged 172 percent to 1.1 billion euros due to high refinery utilization rates and improved product mixes. Conversely, the chemicals division saw a 72 percent drop in results to 63 million euros. New OMV chief executive Emma Delaney highlighted progress on new hydrocarbon projects during the announcement. She noted that the Neptun Deep gas project in the Black Sea, involving OMV’s subsidiary OMV Petrom, is 89 percent complete. First gas flows are expected in the first half of 2027. For the full year 2026, OMV plans organic capital expenditures of 3.5 billion euros. The company assumes an average Brent crude price of $95 per barrel and a gas price of 45 euros per megawatt-hour. In Spain, Repsol increased its quarterly profit from 574 million euros to 2.8 billion euros. Its French rival TotalEnergies more than doubled its adjusted net income, jumping 127 percent to $9.1 billion, roughly 8.2 billion euros. This result exceeded analyst expectations, which averaged $8.3 billion. TotalEnergies CEO Patrick Pouyanne stated that the refining business benefited immensely from current conditions, with sector profits quintupling to $3.6 billion. A near ten percent increase in refining throughput allowed the company to capitalize on record-high margins in Europe and globally. The liquefied natural gas business contributed $1.9 billion to the bottom line. Pouyanne added that the group fully benefits from its integrated model and geographic diversification. TotalEnergies confirmed plans for $2.5 billion in share buybacks in the fourth quarter and announced another program of equal size for the first quarter of 2027. The UK-based Shell reported that its adjusted profit doubled to $10.8 billion, approximately 9.7 billion euros. This marked the second-highest quarterly profit in the company’s history, surpassed only by figures recorded in 2022 following Russia’s invasion of Ukraine. The nine-month-old war in the Middle East helped Shell achieve record refining margins, which reached $42 per barrel compared to $11.60 in the previous period. To return value to shareholders, Shell announced it will conduct share repurchases totaling five billion dollars over the coming months, an amount two billion dollars higher than in the preceding quarter. Market observers note that the combination of geopolitical instability and supply constraints has created an unusually favorable environment for refiners. While upstream producers face challenges related to production delays in conflict zones, downstream operations have captured significant value through margin expansion. The disparity between chemical divisions, which struggled with demand or input costs, and fuel sectors highlights the uneven impact of the current energy landscape across different industrial segments. Companies continue to adjust their investment strategies based on volatile pricing forecasts for both crude oil and natural gas.