Shell’s record fourth quarter profits mirror that of US rivals

The British company's record earnings, more than doubled from a year earlier this week, mirror those reported by US rivals earlier this week and are certain to intensify pressure on governments to raise taxes on the sector.

Chief Executive Wael Sawan said he intends to remain disciplined while delivering compelling shareholder returns.

Shell posted a record fourth quarter profit of US $9.8 billion on the back of a strong recovery in earnings from liquefied natural gas LNG trading, beating analyst forecasts for an US $8 billion profit.

The previous record of US $31 billion was reached in 2008, and the annual profit reached US $39.9 billion, more than doubled from a year earlier.

Shell shares were up 1.3 per cent at the opening of trade in London.

The gains were driven by higher oil and gas prices, strong refining margins and a strong performance from Shell's trading business.

Earnings from its LNG division reached US $6 billion, a record high boosted by strong trading earnings on the back of the gas price volatility, despite a loss in the third quarter and a drop in liquefaction volumes due to the outages at LNG facilities.

Russia's war in Ukraine has caused a lot of volatility in oil, gas and power markets around the world, which Shell and its rivals have benefited from their large global footprint and leading trading operations.

Windfall taxes on the energy sector were imposed by governments struggling with soaring energy bills. Shell expects to incur around US $2.4 billion in accounting costs in the year 2022 due to the levies.

As previously announced, Shell boosted its dividend by 15 per cent in the fourth quarter, the fifth increase since it delivered a more than 60 per cent cut in the wake of the 2020 COVID-19 pandemic.

The company also announced a new US $4 billion share buyback program over the next three months, unchanged from the previous three. In the year to February 2023, it bought back US $19 billion in shares, nearly double the total in pre-pandemic 2019.

The profits helped Shell and many other Western energy companies mask huge writedowns they took on Russian assets that they abruptly exited after the conflict broke out.

Shell hopes to reduce greenhouse gas emissions in the coming decades because of its ambition to build a large renewables and low-carbon energy business.

The company invested $3.5 billion in its renewables and energy solutions business in 2022, about 14 per cent of its capital expenditure of US $24.8 billion. Capital expenditure will reach US $23 billion to US $27 billion in the year 2023.

Mark van Baal, founder of activist shareholder group Follow This, said that Shell can't claim to be in transition as long as investments in fossil fuels dwarf investments in renewables.

The surge in revenue helped Shell reduce its debt to US $44.8 billion at the end of 2022 from US $52.6 billion a year earlier. Its debt-to-cap ratio, known as gearing, dropped to 19 per cent from 23.1 per cent a year ago.