Shell has seen its already impressive profits rise higher in 2022, with the oil giant reporting a tripled profit intake for Q1 and a higher dividend payout. The price of oil has surged to heights of almost $130 per barrel since the war in Ukraine kicked off in late February, and currently stands at $112 per barrel for benchmark Brent Crude.
It’s probable that the ongoing conflict will see the price of oil remain high and in turn bolstering Shell’s profits. The Shell share price has been on the rise, and has increased 23.5% in the year-to-date. However, there is an argument that now is a good time to buy Shell shares, with a recent pull back and profits set to likely rise even further.
The energy giant has benefited greatly from western sanctions against Russia, with the sudden scarcity in supply sending its Q1 2022 profits surging to $9.1 billion from $3.9 billion year-on-year.
Shell dividend
Shell paid out a dividend of $0.25 per share for the period. The group is also currently in the middle of an $8.5 billion share buyback programme, with $4 billion completed on 4 May 2022, and the remaining amount scheduled to be bought back in advance of its Q2 2022 results on 28 July.
The company reported its shareholder distributions for HY2 2022 were expected to be in excess of 30% of cash flow from operating activities, which grew 81% to $14.8 billion against $8.1 billion quarter-on-quarter to Q1 2022.
Shell currently has a strong dividend yield of 3.5, and a dividend cover of 2.3, displaying an adequate level of assurance for shareholders that their payouts are secure.
Shell shares valuation
The oil and gas firm also boasts a PE ratio of 12.6 and a forward PE ratio of 5.2, indicating expectations of serious profit growth in the coming months. The stock price has risen in recent months, however it is dramatically undervalued on a historically earning basis.
Meanwhile, the price of oil is not anticipated to return back below the $100 per barrel mark in the near term which will support Shells earnings.
Renewable Energy
Shell are further adapting, slowly, to become a more renewables-focused energy company. The business is first and foremost an oil and gas firm, which not in dispute. However, the group have been taking steps to gradually adapt to a greener model of operations.
Shell has been moving to become a more climate-friendly investment, which is worth noting if ethical investing is something to take into consideration.
Shell has committed to hit net-zero emissions by 2050, in adherence to the Paris Agreement to limit the rise of average global temperatures to 1.5 degrees Celsius.
The firm plans to reduce its emissions from operations, and capture remaining emissions using technology or balancing them with offsets.
So far, Shell has rolled out charging for electric vehicles, alongside hydrogen and electricity generated by solar and wind power.
The company set a goal to reduce absolute emissions by 50% by 2030 against 2016 levels, and reported peak emissions in 2018 which it is committed to reducing until it achieves net zero.
Shell further operates Shell Recharge Solutions, which aims to expand from its network of 10,000 EV charging points across the UK to 100,000 by 2030. The group said 90% of UK drivers would be within a 10-minute drive of a Shell rapid charger by the end of the decade.
In its Q1 2022 results, Shell confirmed several renewable energy developments in its operations. The oil and gas company mentioned it had won bids alongside ScottishPower to develop 5 GW of floating wind power in the UK.
It also started a power-to-hydrogen electrolyser with 20 MW of production capacity, and acquired online energy retailer Powershop Australia in February 2022.
Shell also reported its win of Block OCS-0541 through its Atlantic Shores Offshore Wind joint venture with EDF Renewables North America in the New York Bight offshore wind auction.
In April, Shell signed an agreement with Actis Solenergi Limited to acquire 100% of Solenergi Power Private Limited, along with the Sprng Energy selection of companies based in India.
Shell have seen skyrocketing profits in the year-to-date, and the price of oil is looking set to climb higher as the year goes on, taking Shell’s profits soaring with it. Shell shares are currently undervalued on a historical earnings basis, and the company have made a commitment to transition to net-zero to lessen its burden on the planet which will likely support the Shell share price long into the future.