Shell reports record earnings as oil, gas prices soar

Adjusted earnings rose 43% from the previous quarter to $9.13bn, beating average analyst forecasts provided by the company of $8.67bn and treble the $3.13bn reported a year earlier.

The profit will fuel further calls for a windfall tax on energy companies as people struggle with the cost-of-living crisis and spiralling inflation. Rival BP on Tuesday reported quarterly profits of $6.2bn – its best in a decade.

Chief Executive Ben van Beurden attempted to head off criticism, arguing that strong earnings support energy security and the transition to more sustainable energy.

"The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted."

Britain's government has resisted calls for a one-off levy claiming it would discourage oil and gas producers from making investments into domestic energy. However, BP chief executive, Bernard Looney, admitted none of the £18bn UK investments the company is planning would be dropped if a windfall tax were imposed.

Cash flow from operating activities rose 81% to $14.8bn year on year and Shell said it now expected shareholder distributions for the second half of 2022 to be in excess of 30% of cash flow. The first-quarter dividend was increased by 4% to 25 cents a share.

The oil giant returned $5.4bn in the first three months of the year and said it would spend another $4bn buying up its own shares over the next three months.

Oil and gas prices have soared in the wake of Russia’s invasion of Ukraine with benchmark Brent crude rising from around $79 a barrel at the start of the year to $111.

Shell previously announced plans to exit investment in Russia in response to the war in Ukraine and took a charge of $3.9bn hit after Moscow's invasion of Ukraine in February.

The company is negotiating an exit from the Sakhalin-2 liquefied natural gas (LNG) project north of Japan, in which it has a 27.5% stake. It is also divesting Nord Stream 2, a venture with the Russian gas company Gazprom.

Shell said it had stopped all spot purchases of Russian oil and gas and would not renew long-term contracts but admitted it still had long-term contractual commitments for Russian LNG.

Higher prices boosted profit at Shell's upstream division, which searches for and extracts oil and gas. Adjusted earnings rose to $3.45bn from $933m a year earlier and 22% compared with the fourth quarter of 2021. Integrated gas earnings rose to $4.09bn from $1.57bn a year earlier and were up 1% from the fourth quarter of 2021.

"Generating value through strong earnings and cash flow, coupled with maintaining a healthy balance sheet and continuing the disciplined delivery of our strategy, are crucial for Shell to play a leading role in the energy transition. This allows us to support our customers as they shift to cleaner energy. It's also the best way for us to contribute to the security of energy supplies," Van Beurden added.