The oil giant reports record annual profits

Shell said last month that windfall taxes imposed by the European Union and the United Kingdom after the profit surge would cost the group about $2 billion.

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British oil giant Shell on Thursday reported its highest annual profit, boosted by rising fossil fuel prices and strong demand since Russia’s full-scale invasion of Ukraine last year.

Shell reported adjusted earnings of $39.9 billion for all of 2022. That’s comfortably up from $28.4 billion in 2008, which Shell said was the firm’s previous annual record, and more than double the firm’s profit for all of 2021 $19.29 billion.

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The oil giant reports record annual profits

Analysts polled by Refinitiv expected full-year 2022 net income to reach $38.3 billion.

For the final quarter of 2022, Shell reported an adjusted profit of $9.8 billion.

Shell has announced a $4 billion share buyback program that is expected to be completed by first-quarter 2023 results — due in early May — and a 15 percent increase in the fourth-quarter dividend per share.

“This is a huge year for Shell and a huge year to look back on,” Shell CEO Wael Sawan told CNBC’s Steve Sedgwick in his first earnings interview since taking over on Jan. 1.

“I feel privileged to step into this role at such a great time in the company’s history. As we look forward, I believe we have a unique opportunity to succeed as a winner in the energy transition. We have a portfolio that I think is unmatched,” Savan said.

“My focus will be very much on performance and capital discipline,” he added.

The results follow in the footsteps of historical annual earnings for US oil companies Exxon Mobil and Chevronwith the largest oil and gas companies in the West expected to collect combined profits of nearly $200 billion for the year, according to data from Refinitiv.

The extraordinary scale of the industry’s profits has renewed criticism and prompted calls for a Big Oil windfall tax.

Shell said last month that it expects to take a $2 billion hit in the final three months of 2022 as a result of new taxes in the European Union and the United Kingdom

“At the end of the day, taxes are a matter for governments to decide on.” We are of course engaging and providing perspectives and the key perspective we are trying to provide is a context around the fact that companies like us that need to invest several billion dollars to support the energy transition requires a secure and stable investment climate.” , Savan said.

“For example, windfall taxes or price caps just undermine confidence in that investment stability, and that’s why I worry about some of the moves that have been made,” he continued.

“I think there’s a different approach that needs to be taken, which is to really attract investment capital at a time when we need to be able to embed energy security into the wider energy system here in Europe.”

Shares in the London-listed company rose 0.6% in early morning trading on Thursday.

“Energy Trilemma”

Shell said the cash capex outlook for 2023 is between $23 billion and $27 billion. Of that, Sawan said roughly a third, if not slightly more, would go to areas like renewable energy.

Shell, which aims to become a net-zero emissions business by 2050, said adjusted earnings for its renewable energy and power solutions unit came in at $293 million for the final three months of 2022, which was down from $383 million in the third quarter.

“Shell cannot claim to be in transition as long as investment in fossil fuels outpaces investment in renewables,” said Mark van Baal, founder of the Dutch group Follow This.

“The majority of Shell’s investments remain in the fossil fuel business, as the company has no target to reduce its total CO2 emissions this decade as required to reach Paris.”

In recent quarters, Big Oil executives have defended their rising profits and said the significant disruption to global energy markets due to the war in Ukraine has reaffirmed the importance of helping resolve the “energy trilemma.”

According to a statement to investors from BP chief executive Bernard Looney late last year, this is about “secure, affordable and low-carbon energy”.

Climate campaigners and shareholder activists were sharply critical.

“That Shell’s annual profits more than doubled last year while millions of people were faced with the impossible choice between putting food on the table and heating their homes is simply stunning,” said Sana Yusuf, campaigner for climate in Friends of the Earth.

“People can see the injustice of paying impressive energy costs while the big oil and gas companies make billions,” Yusuf said.

US oil giant Exxon Mobil on Tuesday reported profit of $56 billion for 2022, marking an all-time high for the Western oil industry, while Chevron on Friday published record profit of $36.5 billion last year.

British oil major BP is scheduled to report full-year earnings on February 7, along with France’s TotalEnergies scheduled to follow on February 8.

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