Shell beats forecasts as oil, gas prices drive soaring profits

Oil giant Shell reported better-than-expected fourth-quarter profits, driven by surging oil and gas prices and announced an $8.5bn share buyback.

Adjusted earnings soared 55% to $6.4bn (£4.7bn) , well above average analyst forecasts of $5.2bn. Demand for oil and gas has spiked as the global economy recovers from the Covid pandemic leading to higher energy bills for consumers.

Shell's results will only fuel calls for a UK windfall tax on companies who are making bumper profits while people struggle with higher prices and a tax rise in April. The energy industry regulator was expected to bring forward details of the latest price cap for customers, with a government support package also in the offing.

Annual adjusted earnings rose to $19.3bn (£12bn) , compared with $4.85bn in 2020. The financial performance was driven by "significantly higher" profits at Shell's integrated gas, renewables and energy solutions division, which generated more than 63% in the final quarter as the energy supply crisis in Europe caused a price spike.

LNG sales grew in the fourth quarter to 16.72m tonnes despite unplanned maintenance at its flagship Prelude floating LNG plant in Australia.

Shell earlier this month jettisoned the "Royal Dutch” from its name and merged its dual-listed shares after moving its head office from The Hague to London as part of a restructure and move towards a lower-carbon business.

Cash flow from operations, excluding working capital, hit $11.1bn in the three months to December 31. Net debt was reduced by $4.9bn to $52.6bn.

“We delivered very strong financial performance in 2021, and our financial strength and discipline underpin the transformation of our company,” said chief executive Ben van Beurden.

“Today we are stepping up our distributions with the announcement of an $8.5bn share buyback programme and we expect to increase our dividend per share by around four per cent for the first quarter of 2022.”

The buyback programme includes the remaining $5.5bn from the sale of Shell’s US Permian Basin assets which it had previously pledged to return to investors.

Danni Hewson, financial analyst at AJ Bell, said calls for a tax on oil and gas giants "are likely to get louder" given "scorching energy prices that are having such an impact on the lives of ordinary people".

"Just that one quarter of one company’s profits would go a long way to cover the anticipated cost to UK households when the new energy price cap is introduced. If all 22 million households expected to be impacted by the rise in the price cap have to fork out the anticipated additional £600 a year that figure would come in at just over £13bn."

“Shell has been unlucky with its timing, but with BP just days away from its trading update questions about whether a windfall tax is a viable solution to the current energy crisis will hang around. Of course, it’s not a straightforward argument, both businesses have a duty to their shareholders, the people who bankroll their operations in good times and in bad."