A Shell logo seen on a petrol station in London. A court in The Hague has ordered oil giant Shell to reduce its CO2 emissions by 45% by 2030 compared to 2019 levels, which is widely viewed as a trailblazer.

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LONDON – Oil giant Royal Dutch Shell reported stronger-than-expected earnings for the second quarter on Thursday, in support of the energy company’s plans to reduce net debt and reward investors.

The Anglo-Dutch company reported adjusted earnings of $ 5.5 billion for the three months ended June. That was $ 638 million in the same period last year and $ 3.2 billion in the first quarter of 2021.

According to Refinitiv, analysts had expected adjusted earnings of $ 5.1 billion for the second quarter.

Shell has increased its dividend for the second straight quarter and announced the launch of a $ 2 billion share buyback program that is expected to complete by the end of the year.

The dividend rose to 24 cents in the second quarter, up 38% over the first three months of the year. It comes a year after the company cut its dividend to shareholders for the first time since World War II.

“We need to make sure that our current shareholder base is happy with what we’re doing in terms of payouts,” Shell CEO Ben van Beurden told CNBC’s Squawk Box Europe on Thursday, reflecting the company’s plans for its Increase shareholder distributions.

“We need to have a strong cash-generative business that will finance the company for the future, but at the same time we need to build a future-proof business.”

The results reflect a broader trend in the oil and gas industry as the major energy companies attempt to reassure investors that they have built a stable base amid the ongoing coronavirus pandemic. France’s TotalEnergies and Norway’s Equinor have also announced share buyback programs.

However, the stock prices of the world’s largest oil and gas companies have not yet seen an improvement in the earnings outlook, and the industry still faces a myriad of uncertainties and challenges.

Shell shares rose over 3% during morning trading in London. The oil and gas company’s share price is up more than 17% since the start of the year, after plummeting nearly 45% in 2020.

Investor skepticism

Shell’s financial results are due to the fact that oil and gas prices have continued to rise in recent months. International benchmark Brent crude oil futures rose an average of $ 69 per barrel in the second quarter, from an average of $ 61 in the first three months of the year. The oil contract was last traded at $ 75.38.

Oil prices have rallied and hit multi-year highs in recent months, and all three of the world’s top forecasting agencies – OPEC, the International Energy Agency, and the U.S. Energy Agency – now expect a demand-driven rebound in the second half of 2021.

A year follows when the head of the IEA proposed representing the worst in the history of the oil markets. The oil and gas industry got into a tailspin in 2020 when the spread of Covid-19 coincided with a historic shock in fuel demand, falling commodity prices, unprecedented write-offs, and tens of thousands of job cuts.

In the run-up to this reporting season, analysts warned that while energy companies were likely to attempt to claim a clean health certificate, investors were expected to have “tremendous” long-term skepticism about the business models of oil and gas companies. This was mainly a consequence of the worsening climate emergency and the urgent need to move away from fossil fuels.

Court decision

Earlier this month, Shell confirmed its intention to appeal a groundbreaking Dutch court ruling calling on the company to take much more aggressive measures to reduce its carbon emissions.

“We agree that urgent action is needed and that we are accelerating our transition to net zero,” said van Beurden of Shell in a statement on July 20. “But we will appeal because a court ruling against a single company is not effective.”

“What we need are clear, ambitious guidelines that will drive fundamental change across the energy system,” he added.

Members of the environmental group MilieuDefensie will celebrate the verdict in the case of the Dutch environmental organization against Royal Dutch Shell Plc on Wednesday, May 26, 2021 in front of the courthouse of the Palace of Justice in The Hague, Netherlands. Shell has been ordered by a Dutch court to lower its emissions harder and faster than planned, dealing a blow to the oil giant that could have far-reaching consequences for the rest of the global fossil fuel industry.

Peter Bure | Bloomberg | Getty Images

The Dutch court ruled on May 26th that Shell must reduce its CO2 emissions by 45% by 2030 compared to 2019. That’s a much larger reduction than the company’s current goal of reducing its emissions by 20% by 2030.

The court ruling also states that Shell is responsible for its own CO2 emissions and those of its suppliers, known as Scope 3 emissions.

The ruling was considered to be the first time in history that a company was legally obliged to adapt its policy to the Paris Agreement. The agreement, which was ratified by nearly 200 countries in 2015, is seen as extremely important in averting the worst effects of climate change.