Shell’s 2022 profits more than doubled to $40 billion

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Fourth-quarter earnings of $10 billion beat estimates

LONDON (Reuters) – Energy giant Shell said on Thursday that Shell made a record $40 billion in profits in 2022, capping a turbulent year in which energy prices after Russia’s invasion of Ukraine allowed it to hand over. Unprecedented returns for shareholders.

The British company’s record profits, which more than doubled from a year earlier, mirror those reported by US competitors earlier this week and are sure to intensify pressure on governments to raise taxes on the sector.

“We intend to remain disciplined while delivering compelling returns to shareholders,” CEO Wael Sawan said in a statement on the first batch of earnings since taking over on January 1.

Shell also posted a record fourth-quarter profit of $9.8 billion on the back of a strong recovery in LNG trading profits, beating analysts’ expectations for a profit of $8 billion.

Annual profit of $39.9 billion surpassed the previous record of $31 billion in 2008. It was driven by higher oil and gas prices, strong refining margins, and strong trading.

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Shell shares were up 3% by 1050 GMT, compared to small gains in the broader European energy index (.SXEP).

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Earnings from the LNG division reached $6 billion, a record high, supported by strong overall trading profits on the back of volatile gas prices, despite recording a loss in the third quarter and a sharp decline in liquefaction volumes due to outages at the LNG facilities.

Governments grappling with soaring energy bills have responded with unexpected taxes on the energy sector, but Britain’s opposition Labor Party said Prime Minister Rishi Sunak had not done enough.

“The government is letting fossil fuel companies profit abundantly from the deadlock while refusing to implement an appropriate windfall tax,” Ed Miliband, Labor’s climate policy spokesman, said in a statement.

Shell said it expects to incur around $2.4 billion in accounting costs related to windfall taxes in 2022, and that it will pay $500 million in cash tax in Britain this year.

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[1/2] An image of Shell Energy’s logo during the launch ceremony for the hydrogen electrolysis plant at its Rhineland refinery in Weissling near Cologne, Germany, July 2, 2021. REUTERS/Thilo Schmuelgen

Follow up on purchases

Sawan, who earlier this week announced changes to Shell’s structure, has sought to convey a sense of continuing the strategy of his predecessor Ben van Beurden.

“The company is in very good health,” Sawan told reporters.

Shell will brief investors on its strategy in June.

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

The company also announced a new $4 billion share buyback program over the next three months, unchanged from the previous three months. It repurchased $19 billion in shares in the year ending February 2023, nearly double the total in pre-pandemic 2019.

The profits have helped Shell and several other Western energy companies hide huge writedowns of Russian assets that they abruptly exited after the conflict erupted.

But Shell said on Thursday it continued to export some liquefied natural gas from Russia.

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Shell aims to build a large renewable energy and low carbon business as part of its ambition to sharply reduce greenhouse gas emissions in the coming decades.

The company has invested about $3.5 billion in its renewable energy and energy solutions business in 2022, about 14% of its $24.8 billion capital expenditure. Capital spending in 2023 will be $23 billion to $27 billion.

“Shell can’t claim to be in transition as long as investments in fossil fuels dwarf investments in renewables,” said Mark Van Pal, founder of the activist shareholder group Follow This.

The increase in revenue helped Shell sharply reduce its debt to $44.8 billion at the end of 2022 from $52.6 billion a year earlier. The debt-to-capital ratio, known as leverage, fell to 19% from 23.1% a year earlier.

(Reporting by Ron Bousso and Shadia Nasrallah). Editing by David Goodman and Jean Harvey

Our Standards: The Thomson Reuters Trust Principles.

Shadia Nasrallah

Thomson Reuters

He writes about the intersection of corporate oil and climate policy. He has written on politics, economics, immigration, nuclear diplomacy, and business from Cairo, Vienna, and elsewhere.

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