When we recommended oil and gas giant Shell (SHEL) at the end of June, we flagged the new chief executive’s determination to improve margins, cash and shareholder returns as a key reason to own the shares.

Clearly, we didn’t anticipate a further rise in global geopolitical tensions, as we are witnessing currently, but that plays into an underlying trend among countries and governments to shore up their fossil fuel resilience even if that comes at the expense of renewables.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Shortly after our article in the summer, the firm reported a 56% slump in second-quarter earnings to $5 billion as oil and gas prices fell and refining margins weakened.

Brent crude prices averaged $80 per barrel in the second quarter against $110 a year earlier, following the invasion of Ukraine, while liquified natural gas prices fell even further from $33 per MMBtu (million British thermal units) to less than $12, leading to a slump in trading profits.

The miss prompted the group to slow its share buyback programme, although chief executive Wael Sawan insisted he was still fully committed to repurchases ‘given the value our shares represent’.

More recently, oil prices have perked up again on fears about global supplies.

The company courted controversy in September when it not only ‘retired’ its goal to spend up to $100 million per year on carbon credits, but revealed it was exploring a number of new LNG projects in North America and Africa as it prepares for higher demand during the ‘energy transition’.

WHAT SHOULD INVESTORS DO NOW?

With the shares trading at all-time highs some investors will be tempted to book profits, but we believe there is more in the tank for Shell.

Third-quarter results are due at the start of November. Given the firm has already published a preview there are unlikely to be any negative surprises.

Meanwhile, although the shares now trade on eight times 2024 earnings, there is still upside to peers such as Chevron (CVX:NYSE) and ExxonMobil (XOM:NYSE) which trade on double-digit multiples.

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