Shell made a record annual profit for 2022 of almost $40bn, beating market expectations in the final three months of year on the back of a strong performance from its gas trading business.
Europe’s largest oil and gas company said on Thursday that adjusted earnings had more than doubled to $39.9bn, smashing the previous record of $28.4bn set in 2008.
The earnings continued a record set of results for the world’s biggest energy companies, which have all benefited from high prices for hydrocarbons in the past 12 months amid upheaval in energy markets caused by Russia’s invasion of Ukraine.
The profits generated by Shell and its rivals have led to widespread calls for higher taxation, and both the EU and the UK have introduced new levies in the past year. Shell said it expected to pay an additional $2.3bn in tax on its 2022 earnings because of the combined impact of the EU’s windfall tax and the UK’s energy profits levy.
ExxonMobil this week reported a $55.7bn profit for 2022, the highest annual earnings for a western oil company, after US rival Chevron made $36.5bn. BP and France’s TotalEnergies are due to report next week and bring the total profits of the supermajors last year to almost $200bn.
Shell’s adjusted earnings of $9.8bn in the final three months of the year, the second-highest quarterly figure in the company’s history, far exceeded average analyst estimates of $8bn.
Almost two-thirds of that came from its gas business, which includes the world’s largest liquefied natural gas trading operations. That division, integrated gas, generated adjusted earnings of $6bn in the final three months of the year as Shell sold 16.8mn tonnes of LNG, up from 15.7mn tonnes in the third quarter.
Wael Sawan, Shell chief executive, said the record results demonstrated “the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world”.
Despite the hydrocarbons-driven windfall and pressure from activists to invest more in low-carbon technologies, Shell left its capital spending guidance unchanged at $23bn-$27bn for 2023. “We intend to remain disciplined while delivering compelling shareholder returns,” Sawan said.
Shell said it had distributed $26bn to shareholders in 2022 including $18bn in share buybacks. The company said it would buy back a further $4bn in stock in the first four months of 2023.
The record profits mean Sawan, who took over as chief executive at the start of January, inherits the company in strong financial health but still faces questions from investors about its ability to generate profits as it gradually shifts away from oil and gas towards lower-carbon energy.
Shell’s current low-carbon division, renewables and energy solutions, which still includes the trading of piped gas and power, generated less than 5 per cent of the group’s profits in 2022.
Sawan this week announced a shake-up of his executive committee that will bring the company’s low-carbon initiatives into a single division headed by the current downstream director Huibert Vigeveno.
Shell made several low-carbon investments in 2022, including its $1.6bn acquisition of India’s Sprng Energy. However, the $3.5bn it spent in total in renewables and energy solutions was only 14 per cent of the group’s total capital spending of $24.8bn. In contrast it spent $8.1bn in its upstream oil division and $4.2bn in its integrated gas division.
“Shell can’t claim to be in transition as long as investments in fossil fuels dwarf investments in renewables,” said Mark van Baal, founder of Follow This, an activist shareholder group.