Shell shares were up 3.1% to 2,294.5p in early morning trading on Thursday, as the energy giant’s profits tripled on the back of surging oil prices.
The escalating conflict in Ukraine sent the price of Brent crude to $110 per barrel, boosting Shell to a quarterly profit of $9.1 billion, its highest on record and triple its previous $3.2 billion profit year-on-year.
Russia Impact
Shell confirmed it took a $3.9 billion charge as a result of suspending its Russia operations.
However, the Russian invasion of Ukraine has driven oil prices to heights in excess of $120 per barrel over the past few months since the conflict began in late February.
“The Cinderella story we’ve seen among the oil majors continued this week as Shell posted record profits thanks to an extremely accommodative environment,” said Hargreaves Lansdown equity analyst Laura Hoy.
“The group’s exit from Russia took a $4bn bite out of the bottom line, but excluding this one-off expense, the group’s been firing on all cylinders as rising prices offset minor volume declines.”
Shell Dividend and Shares Buyback
Shell also announced a dividend of $5.4 billion, amounting to 25c per share for Q1 2022, with an increase of 4% over the dollar dividend for Q4 2021.
The company confirmed that $4 billion of shares had been repurchased under its $8.5 billion share buyback programme for HY1 2022, with the remaining $4.5 billion expected for completion in advance of Shell’s Q2 2022 results.
Windfall Tax Calls and Renewable Energy Growth
Energy company BP also reported skyrocketing profits, despite the $25.5 billion impact from pulling out of its 19.75% stake in Rosneft earlier in the year.
Soaring profits from the UK’s two major energy firms have sparked renewed calls for a windfall tax to help consumers mitigate the soaring cost of oil and gas, as April’s 54% rise in the energy price cap saddled households with an extra £700 in energy costs per year.
However, it appears that oil and gas companies are scrambling to grow their green energy credentials in an attempt to kick extra tax discussions to the curb.
“Calls for a windfall tax have been rebuffed by claims that the majors will start to clean up their acts, spending some of the excess to build out their renewables divisions,” said Hoy.
“While renewables is just a drop in Shell’s $19bn bucket, it’s likely to become a much larger slice of the pie as the energy transition ramps up.”
“This technology is largely unproven, so oil and gas investors that have become accustomed to generous returns are taking a leap of faith. If the group’s able to build out this part of the business to become a reliable profit driver while oil prices are still high, it would make the transition all the smoother.”