Shell posted record profits of nearly £10bn between April and June and pledged to pay out £6.5bn to shareholders as the oil supermajor took advantage of a surge in energy prices triggered by Russia’s invasion of Ukraine.
The FTSE 100 company posted adjusted profits of $11.5bn (£9.5bn) in the second quarter of the year, beating its previous peak – set between January and March – by 26%. Earnings more than doubled from the same period in 2021.
The choppy trading for Shell, BP and other major oil and gas companies contrasted with households and much of the rest of the economy having to cope with higher energy prices that sent inflation soaring to 40-year highs in UK and elsewhere, and which threaten to tip economies into recession in much of the world.
The scale of oil company profits led the UK government to eventually give in to calls for a sudden tax to redistribute some of the profits, although some senior Tory ministers are believed to support scrapping the tax amid a leadership campaign that will lead to a new prime minister and cabinet in September.
The tax on windfall profits – known as the Energy Profits Levy – will not apply until July 14, meaning second-quarter earnings and payouts to shareholders are not affected.
Still, it remains a boon for Shell and its shareholders, who received $7.4 billion in the first quarter of 2022 and will receive another $6 billion in share buybacks and $1.8 billion in dividends announced Tuesday.
Shell said it experienced “higher realized prices, higher refining margins and higher gas and power trading”.
Vladimir Putin’s invasion means Shell may have to divest itself of its stake in the Sakhalin-2 gas project with Russia’s Gazprom. Yet the recognized cost of abandoning Russia is $4.3 billion – just over a third of the profits Shell has made in the three months since Kremlin troops entered Ukraine. The company already booked $4.2 billion in costs related to its withdrawal from Russia, but increased that estimate by just $111 million in the second quarter of the year.
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Shell said it expects the tight energy market to be here to stay. It added $4.3 billion to its earnings attributable to shareholders to account for higher-than-expected mid- to long-term prices “reflecting current demand and supply fundamentals in the energy market.”
Ben van Beurden, Shell’s chief executive, acknowledged the “enormous challenges for consumers, governments and companies” caused by “volatile energy markets” but claimed the company was “using our financial strength to invest in secure energy supplies that the world needs today, taking real, bold steps to reduce carbon emissions and transform our company for a low-carbon energy future.”
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