LONDON: Shell delivered a record US$40 billion profit in 2022, the energy giant said on Thursday (Feb 2), capping a tumultuous year in which a surge in energy prices after Russia’s invasion of Ukraine allowed it to hand shareholders unprecedented returns.
The British company’s record earnings, which more than doubled from a year earlier, mirror those reported by US rivals earlier this week and are certain to intensify pressure on governments to further raise taxes on the sector.
“We intend to remain disciplined while delivering compelling shareholder returns,” Chief Executive Wael Sawan said in a statement on the first set of earnings since he took the helm on Jan 1.
Shell also posted 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.
Annual profit reached US$39.9 billion, more than doubling from a year earlier and far exceeding the previous record of US$31 billion in 2008.
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, robust 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 overall trading earnings on the back the gas price volatility, despite recording a loss in the third quarter and a sharp drop in liquefaction volumes due to outages at LNG facilities.
Russia’s war in Ukraine has sparked huge volatility in oil, gas and power markets around the world, from which Shell and its rivals benefited through their large global footprint and leading trading operations.
Governments struggling with soaring energy bills responded by imposing windfall taxes on the energy sector. Shell said it expects to incur around US$2.4 billion in accounting costs related to the levies in 2022.
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 programme over the next three months, unchanged from the previous three. It bought back US$19 billion in shares in the year to February 2023, 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 they abruptly exited after the conflict broke out.
Shell aims to build a large renewables and low-carbon energy business as part of its ambition to sharply reduce greenhouse gas emissions in the coming decades.
The company invested around US$3.5 billion in its renewables and energy solutions business in 2022, around 14 per cent of its capital expenditure of US$24.8 billion. Capital expenditure in 2023 will reach US$23 billion to US$27 billion.
“Shell can’t claim to be in transition as long as investments in fossil fuels dwarf investments in renewables,” said Mark van Baal, founder of activist shareholder group Follow This.
The surge in revenue helped Shell sharply reduce its debt to US$44.8 billion at the end of 2022 from US$52.6 billion a year earlier. Its debt-to-capital ratio, known as gearing, dipped to 19 per cent from 23.1 per cent a year earlier.