Shell's Profits Soar on Rising Oil and Gas Prices

The supermajor announced adjusted earnings of $11.5 billion in the year's second quarter, shattering the $9.1 billion achieved in previous quarter.

Shell, the UK-headquartered energy supermajor, has shattered its quarterly profit record for the second consecutive quarter and launched a $6bn share buyback program as the conflict in Ukraine continues to deliver bumper profits. Shell is one of the first supermajors to disclose its results for the year's first half. In the coming days, ExxonMobil, Chevron, and BP will likely reveal good performances.  

The supermajor announced adjusted earnings of $11.5 billion in the year's second quarter, shattering the $9.1 billion achieved in the previous quarter. This result was significantly higher than the previous year's total of $5.5 billion, which was more than twice as much as the average projection of $11 billion. The cash flow from operations for the first half of 2022 reached $23 billion, higher than the average expert projection of $19.2 billion. Working capital movements were not included in this figure. The net debt was reduced from $48.5 billion three months earlier to the lower figure of $46.4 billion.

Shell maintained its dividend at $0.25 per share but stated that, with the $6 billion buyback plan, total distributions to shareholders would be "significantly in excess" of 30 percent of cash flow from operations. In addition, a new round of share purchases has been initiated following the completion of buybacks totaling $8.5 billion during the first half of the year. Despite this, the dividend has not yet recovered to the level before the epidemic, which was $0.47 per share. In 2020, Shell cut their dividend by two-thirds, bringing it down to $0.16 per share. That was the company's first dividend cut since the conclusion of the second world war. In addition, COVID lockdowns negatively impacted demand, contributing to oil prices falling below $20 per barrel.

Shell produced less oil than it did in the first quarter, but the company profited from higher pricing. This reflects the skyrocketing cost of crude in April, May, and June due to Russia's invasion of Ukraine in February. The company's chemicals and products division performance was driven by higher refining margins, while the company also reported "exceptionally robust" profitability from its gas and power trading division.

On Monday, Shell announced that the Jackdaw gasfield in the UK North Sea had given the green light for development. But despite the skyrocketing revenues, the company has not changed its plans for worldwide investment; its capital expenditures for 2022 are still expected to be in the range of $23 billion to $27 billion.

This year, energy corporations in several countries, including the United Kingdom, have been subjected to higher taxes than in previous years; nonetheless, another year of record earnings may result in calls for even higher tax rates. Ben van Beurden, the chief executive of Shell, voiced his opposition to the energy earnings levy that the United Kingdom government implemented in May. In response to proposals for further tax rises, he argued that there should be more significant investment in the energy sector.

During the morning trading session in London, Shell shares increased by almost one percent.

Note: TotalEnergies of France, which also released its results on Thursday, stated that its profits for the second quarter had almost tripled to $9.8 billion compared to the same period a year earlier. During the recent energy crisis in the UK, Centrica, the parent company of British Gas, reported a rise in operating earnings that were five times higher than before.

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