Shell reports record-high $40bn annual profit

Company's profit more than doubled in 2022

A Shell petrol station in London. The company has announced a $4 billion share buyback programme over the next three months. EPA
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Oil and gas company Shell reported a record profit of $40 billion in 2022 as it benefited from higher energy prices caused by Russia's invasion of Ukraine last year.

Shell's full-year earnings of $39.87 billion - one of the biggest ever profits reported by a British company - beats the London-listed company's previous record of $28.4 billion set in 2008. Shell made $19.23 billion in 2021.

The company's fourth-quarter profit surged 54 per cent to $9.81 billion after a recovery in earnings from liquefied natural gas trading.

Brent, the benchmark for two thirds of the world’s oil, closed in on a record high of $147 a barrel after Russia’s invasion of Ukraine last year. Oil prices have since given up most of their gains and are now trading in the range of $80 to $85 a barrel.

“Our results in the fourth quarter and across the full year demonstrate the strength of Shell's differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world,” said chief executive Wael Sawan.

Shell announced a new $4 billion share buyback programme over the next three months, unchanged from the previous three months.

“We intend to remain disciplined while delivering compelling shareholder returns,” Mr Sawan said.

The company’s LNG sales volumes stood at 16.82 million tonnes in the fourth quarter, up from 15.66 million tonnes in the preceding quarter.

Shell’s earnings from its integrated gas business surged by about 48 per cent to $6 billion in the reported quarter.

Wael Sawan, Shell's new CEO, during an oil conference in Rio de Janeiro, Brazil. Reuters

The company's trading division recorded a loss of close to $1 billion in the third quarter, after traders were caught out by a sharp rally in European gas prices when Russia halted supplies.

"The oil and gas giant has once again overwhelmed its investors ... investors who have been long on energy stocks certainly are happy today, especially Shell’s investors," said Naeem Aslam, chief market analyst at AvaTrade.

Shell's shares were trading nearly 2 per cent higher this morning on the London Stock Exchange. The stock has gained nearly 25 per cent over the past 12 months.

"With $40 billion in profit, Shell holds a very strong place with plenty of ammunition to expand its territory in the renewable energy space," Mr Aslam said.

Global competition for LNG cargoes is expected to intensify this year after China, the world’s second largest economy, reopened its borders for the first time in three years.

Europe, which is reducing its reliance on Russian gas, has increased LNG imports from the Gulf and the US.

"We expect European gas prices to be very volatile and still high compared with pre-war levels, and will only sustainably normalise from 2025, when the required LNG facilities and interconnectors are put in place in Europe," ratings agency Fitch said in a report on Wednesday.

In November, Shell said it was reviewing plans to invest £25 billion ($31 billion) in British projects after the UK government extended a windfall tax on energy companies.

The UK has increased the Energy Profits Levy on oil and gas companies to 35 per cent from 25 per cent, taking the total tax on the sector to 75 per cent.

"As the British people face an energy price hike of 40 per cent in April, Rishi Sunak is letting the fossil fuel companies making bumper profits off the hook with his refusal to do a proper windfall tax," Britain's shadow climate change secretary Ed Miliband said in a Tweet on Thursday.

Meanwhile, Sir Ed Davey, leader of the Liberal Democrats, called Shell's record high profits "outrageous."

"Rishi Sunak was warned as Chancellor and PM [prime minister] that oil and gas giants were making outrageous profits. He ignored us, and now families struggle as oil companies rake it in. Yet another Tory failure," said Mr Davey in a Tweet.

Updated: February 02, 2023, 1:07 PM